Today, Bitcoin is becoming an issue. While some governments worldwide are sending out warnings, others are warming up to the sustained performance of the Bitcoin market against all odds. Traditional banks intend to lead a frontal assault against Bitcoin, as Operation Tarnish Image is underway. Meanwhile, the Bitcoin markets march with self-assured hubris and even promise freedom from the traditional banking system!
Ever since its status as a “proper currency” was acknowledged formally in 2010—thanks to its acceptance by marquee businesses such as Expedia, WordPress, and Microsoft—Bitcoin has come a long way. Its value soared from around $1150 (in Jan 2017) to an all-time high of over $17,382 (in Dec 2017). It is now being said that the supply of Bitcoin would slow down owing to its high demand. News reports suggest that the wider cryptocurrency market is seeing gains. In fact, the top-10 cryptocurrencies by market capitalisation are witnessing price increases every day. As it stands, the total market capitalisation of cryptocurrencies is roughly at $456 billion. Perhaps when the total market value of Bitcoin exceeds $500 billion, India’s Central bank would favourably toy with the idea of purchasing digital currencies. At any rate, there is no sign of Bitcoin value falling in the near future. Clearly, these are times for investing in Bitcoin.
Let us look at some of the key drivers that buttress the growth of this new form of currency.
Firstly, the highly encrypted nature of Bitcoin transactions is fool-proof. Each transaction or money transfer would be safe without the risk of any data leakage. It is widely considered as the fastest method of transferring money online. To make a payment, the individual has to approach an agent, who transfers the Bitcoin equal to the money’s worth immediately to the payee. In addition, Bitcoin’s encryption contains multiple levels of cryptographic coding, which guarantees top-notch protection against frauds or attempts of online theft. This is a far cry from the error-prone and vulnerable firewall protection that traditional banks depend on to ensure safety to monetary transactions.
Secondly, the value of a Bitcoin is entirely dependent on market demands; Bitcoin exchanges determine the value unlike the conventional currency systems that are controlled, monitored and regulated by specific authorities.
Thirdly, there is investor anonymity. Receiving Bitcoin payment doesn’t require a traditional bank account, bank cards, etc. People simply need a reliable Internet connection and designated software to transfer and receive the money. As these transactions are free from banks’ watchful eyes, Bitcoin and other cryptocurrencies will bring communities closer through peer-to-peer (P2P) transaction and crowdfunding platforms.
Lastly, there is no transaction fee associated with every movement of the currency. Depending on the agent they approach, people have to pay a minimum service charge while sending or receiving money. Unlike the banking system, you would not find any arbitrary imposition of huge processing fee or service charge on transactions.
Bitcoin has disrupted the markets, governments, and institutions. However, enterprising governments around the world are warming up to the realities and possibilities of giving Bitcoin a larger room as befitting its growing status. All the growing clamour begs the question: What next with Bitcoin? Now, with cryptocurrencies being preferred over gold by investors, it only remains to be seen whether Bitcoin will replace gold as the prime medium of exchange and investment. Or, maybe we are in the throes of preparing for a decentralised economy. Or, arrest the rising inflationary trends… the possibilities are numerous with Bitcoin.
Today, the fastest growing Bitcoin markets are Japan, South Korea, Malaysia, and Indonesia. The GCC and African Union countries are not far behind. Maybe there is a lesson or two hidden in these markets.