This is all just meant to be a primer. Don't fuss over the details, I'm just trying to convey concepts. This isn't directed at you so much as anyone that's just curious and doesn't know.
Someone can explain the hard facts of bitcoin mining etc. better than I can, so I'll try to explain "THE PROBLEM" that bitcoin solves. In reality, it is currency-like in that it acts as one part currency and one part commodity though it is truly neither (much like all currency, I mean dollaz is just paper lolz amirite?). It's a sort of economic experiment when you really get down to it. The easiest way to think about it is probably bottle caps in Fallout or something of that nature. It's worth what you and I say it's worth.
I'll use the word "appears" quite often. I'll explain why at the end. Just know that conjecture is a big part of the situation right now.
The article talks about its unregulated nature and that's completely correct. It appears to be completely unregulated. And that's its greatest weakness and its greatest strength. Bitcoin appears to be a response to our world's economic situation and by that I mean increased action taken by central banks. And by that, I mean intentionally inflationary tactics used by the central banks to try to increase employment. Central banks have a dual mandate: low inflation and full employment. These two things are naturally in tension with each other so by serving one, you harm the other (theoretically). For some people that have particularly strong feelings about this (libertarians typically HATE central banks), this is heresy to even interfere. Bitcoin by its nature cannot be interfered with in the way central banks interfere with their currencies. DON'T
WITH MAH MONEY! So they and the computer nerds of the world were the first to jump on the bitcoin bandwagon. Next came the anti-government (and illegal crime organization) types and then came small business owners who wanted easy publicity by way of taking this new weird currency. So you started to see bitcoin make the jump from currency-currency trades (ie dollars for bitcoins) to currency for commodity/service trades (ie bitcoins for coffee). That jump paired with the publicity increased its exposure and caused more people to want to get involved in it. At somewhere around this point, market makers (ie professional traders) started to take notice and make moves. All of these things are positive pressure that increase the value of bitcoin. Since January, critical mass was hit and demand exploded as the financial world realized this was their wet dream: a tradeable thing whose price could be easily manipulated via large positions. It has no natural "price" and so with imagination being the only barrier to pricing, you can basically do whatever you want. How much does a cup of coffee cost? If we asked 10 random people, we would get an answer with a relatively small amount of deviation. If we asked how many British pounds we got for a dollar, we'd get a relatively decent range. If we asked the same 10 how much a bitcoin was worth, they'd have no idea.
tldr: It's ripe for attack.
If you put in a massive buy order and got it satisfied quickly, you could cause the market to jump massively and literally buy your way to more value. That had been happening until, oh, about yesterday when the play flipped. The sell side vultures moved in and did the same thing in the opposite direction. They shorted the trade via massive sell offers and crushed its value.
And that's the problem with unregulated currency. That's one of the major reasons we went off the gold standard and have central banks. Could you imagine if the US Dollar was swinging in value literally hundreds of percent from day to day? If it was worth 4 times what it was in January? No one could afford American goods overseas! Or if it crashed 41% in one day? We couldn't afford anything imported anymore!
So yea. The other shoe. The reason I say "appears" is because nobody knows who actually created the currency and who or how it is maintained. It could be me or Columbian drug cartels or the Illuminati. Nobody knows who they are or what their true intentions are. Scary?
yes.
