Drug dealers aren't the only ones cashing in on Bitcoin. The hackers behind Lulz Security, whose campaign of online havoc drew worldwide attention back in 2011, received thousands of dollars' worth of bitcoins after promising followers that the money would go toward launching attacks against the FBI.
A report apparently drawn up by the bureau and leaked to the Internet last year said that "since Bitcoin does not have a centralized authority, detecting suspicious activity, identifying users and obtaining transaction records is problematic for law enforcement."
It went on to warn that bitcoins might become "an increasingly useful tool for various illegal activities beyond the cyber realm" — including child pornography, trafficking, and terrorism.
The FBI did not immediately respond to an email seeking comment.
Late last month, the U.S. Treasury's Financial Crimes Enforcement Network, or FinCen, announced it was extending its money-laundering rules to U.S. bitcoin dealers and transfer services, meaning that companies that trade in the cybercurrency would have to keep more detailed records and report high-value transactions.
Many in the Bitcoin community are frustrated at the attention paid to the shadier side of the virtual economy.
Atlanta-based entrepreneur Anthony Gallippi said the focus on drugs and hacking misses the "much bigger e-commerce use for this that's growing and that's growing rapidly."
Very few businesses set their prices in bitcoins — the currency swings would be too jarring — but an increasing number are accepting it for payment. Gallippi's company, BitPay, handles Bitcoin transactions for some 4,500 companies, taking payments in bitcoins and forwarding the cash equivalent to the vendor involved, which means that his clients are insulated from the cybercurrency's volatility.
Gallippi said many of the businesses are e-commerce websites, but he said an increasing number of traditional retailers were looking to get into the game as well.
"We just had an auto dealership in Kansas City apply," he said.
In March, BitPay said its vendors had done a record $5.2 million in bitcoin sales — well ahead of the $1.2 million's worth of monthly revenue estimated to have coursed through Silk Road last year.
Even artists accept bitcoins. Tehran-based music producer Mohammad Rafigh said the currency had allowed him to sell his albums "all over the world and not only in Iran."
Gallippi said the cybercurrency's ease of access was its biggest selling point.
With Bitcoin, "I can access my money from any computing device at any time and do whatever the heck I want with it," he said. "Once you move your money into the cloud why would you ever go back to putting your money in the bank?"
Many Wall Street veterans are skeptical — and they may feel vindicated after Bitcoin's latest tumble.
"Trading tulips in real time," is how longtime UBS stockbroker Art Cashin described Bitcoin's vertiginous rise, comparing it to the now-unfathomable craze that saw 18th century Dutch speculators trade spectacular sums of money for a single flower bulb.
"It is rare that we get to see a bubble-like phenomenon trade tick for tick in real time," he said in a note to clients last week.
One Bitcoin supporter with a unique perspective on the boom might be Mike Caldwell, a 35-year-old software engineer based in suburban Utah. Caldwell is unusual insofar as he mints physical versions of bitcoins at his residence, cranking out thousands of homemade tokens with codes protected by tamper-proof holographic seals — a retro-futuristic kind of prepaid cash.
Caldwell acknowledges that the physical coins were intended as novelty items, minted for the benefit of people "who had a hard time grasping a virtual coin."
But that hasn't held back business. Caldwell said he'd minted between 16,000 and 17,000 coins in the year and a half that he's been in business. Demand is so intense he recently announced he was accepting clients by invitation only.
Some may wonder whether Caldwell's coins will one day be among the few physical reminders of an expensive fad that evaporated into the electronic ether — perhaps the result of a breakdown in its electronic architecture, or maybe after a crackdown by government regulators.
When asked, Caldwell acknowledged that bitcoin might be in for a bumpy ride. But he drew the analogy between the peer-to-peer currency enthusiasts who hope to shake the finance world in the 2010s with the generation of peer-to-peer movie swappers who challenged the entertainment industry's business model in the 2000s.
"Movie pirates always win the long game against Hollywood," he said. "Bitcoin works the same way."