Of course, it's not as if throngs of Cypriots are clamoring to exchange their euros for bitcoins, but the precarious nature of the financial system in the Euro zone has drummed up more interest in the digital money, even from Americans. "Cyprus fueled the fire of what people have felt since the financial crisis and the housing bust--mistrust of government, mistrust of banking," said Alan Safahi, Founder and CEO ZipZap, the largest cash payment processor for Bitcoins with more than 700,000 locations globally. "It's enough to drive people away from fiat currency." By contrast, Bitcoin, as a decentralized currency that can be freely exchanged in a p2p fashion or between consumers and merchants, is immune to the undulations of traditional banking systems and safe from the ramifications of changing interest rates and inflation. And with a cap at 21 million bitcoins that will be issued (there are currently 11 million bitcoins in circulation), some argue Bitcoin will behave with more stability. That's why over the last six months, Jonathan Waller, a 29-year-old Brit working in Tokyo as a video game developer, has put 95% of his savings into Bitcoin. He also runs the Tokyo Bitcoin Meetup group, which has had a 400% increase in size since last month in light of the attention garnered from Cyprus.
"I keep an eye on the worldwide financial situation, and this is what has caused me to look for places to keep my money safe," he said. "I'm terrified about the bond situation in the U.S. and Japan, and realize this is just the beginning."
"When using payment cards, you are required to include your account number and your billing address," Kelly said. "With this information, identity thieves are off and running. Whereas with Bitcoin, their encryption renders it so that only the owner of the bitcoins can use them."
But Bitcoin is in the nethersphere between commodity and currency; the commodity value is, in fact, tethered to its value as currency. And the paranoid who are participating in capital flight might do well to view Bitcoin not as a currency alternative but as a commodity investment. "Look at it as any kind of speculative investment," ZipZap's Safahi said. "Only invest what you can afford to lose. There might be a little bit of bubble and it might be a little ahead of itself, but it's still a good value."