Bitcoin is not a long story, but it is fascinating. This cryptocurrency and all the others that emerged after the first one came out, we could say that as a whole the phenomenon of digital currencies; dazzles investors, economists, programmers and almost everyone who has learned or started their cognitive adventure in this sector.
Bitcoin is the first and most important of electronic or digital currencies, it saw the light in 2009 and uses a P2P protocol. Ideal to carry out international payments or transactions, as it is not linked to regulatory bodies or any country.
The use that is given will not be directly related to the identity of the user, therefore its anonymity feature is one of the most attractive things in forex.
It may be acquired as payment for goods or services, or be bought or exchanged on sites specialized in the sale and exchange of this type of currency.
It can also be achieved through mining, a method consisting of solving complex mathematical problems in exchange for a payment in bitcoins. Through mining, currency transactions are approved and network security is maintained.
For December of last year, historically and surprisingly, the value of USD 19 passed, subsequently falling below USD 850 in a short time. In January - 12 of this year it was around USD 000 and on Tuesday, February 24 11, fluctuating between 114 - 13.
With an extremely volatile price, this makes you look at it carefully and cautiously, and at the same time that its phenomenon is discussed in depth from many edges that already need to be scrutinized.
At different levels of competition it is criticized or defended, but by the very bases of its operation it seduces half the world.
Being a decentralized monetary system in which there is no direct control of any state or company, it excites more than one and it is not so easy to stop looking at it.
Its potential for transcendence is so great that constantly mobilizes and promotes more and more controversy on how to handle this phenomenon of cryptocurrencies.
The alarms begin to go off
As of this date, mid-February 2018, “Bitcoin” is a fashionable financial phenomenon and they begin to enter the list; governments, entities and institutions that are seriously warning about the risks of this virtual currency.
China already last September had banned ICOs (Initial Coin Offering), types of operations used at the business level to have financing with cryptocurrencies.
Currently, this country already intends to prevent access to international exchange platforms. For its part, South Korea shows serious intentions of projecting itself prohibitively against the use of digital currencies.
The British Prime Minister has expressed that, almost certainly, restrictive actions will be taken against cryptocurrencies due to their highly speculative nature and the fear of their use by criminals.
Lloyds Bank, one of the largest bank groups in the world, has already banned buying digital currencies through the use of its credit cards, although not yet with debit cards.
Many giants of this type are highly concerned about the possibility of a colossal fall in the value of these currencies, due to their extreme volatility; which could cause immense losses to your clientele, seeing them later unable to pay their debts.
Danske Bank, the Danish bank, has recommended to its employees not to trade cryptocurrencies, and although in itself they have not enacted an official ban, but they say they are closely monitoring the situation and do not rule out prohibitive measures soon.
Bank of America, announces to its clients with intentions to buy Bitcoins, to exercise extreme caution and be very cautious, limiting the purchase of the cryptocurrency in the investment banking division of your institution.
Nordea, the northern European banking giant, has even prohibited its thousands of employees from acquiring or trading Bitcoins, a measure that will come into effect on February 28. They justify such restrictions by stating that there are too many risks and therefore proceed to protect their employees and the bank.
For its part, the recommendation to clients is clear and direct, they are told not to trade in digital currencies, arguing that bitcoin is absurd in itself and defying all logic.
The CNMV "National Securities Market Commission" who supervises the securities markets in Spain, has admitted to being concerned about the issue of cryptocurrencies, and has issued a serious recommendation to retail investors not to buy them.
The European Banking Federation has said that although at this time it has not determined a legislation on the use of bitcoins, it does not rule out that it may be doing so in the future.
And even Facebook has banned ads related to this cryptocurrency, alluding that it is frequently closely linked to fraudulent practices.
Reasons behind the warnings
Let's shuffle some existing ideas expressed by experts, which will allow us to contrast the spectrum of definitions and concepts present, which call for preventive actions against the influence of bitcoin and other currencies of its kind.
- The currency behaves like a financial or speculative bubble.
In such a case, the price rises abnormally away from its true value.
Many buyers come interested in selling at higher prices in the future, following the comeback until reaching levels so high that the bubble ends up bursting, suddenly dropping the price to negligible levels lower than normal, leaving a huge debt drag.
It is possible that the bubble, if it really exists, is about to burst, as the price picks up and falls in small periods of time and very abruptly
- The most important point of bitcoin today is precisely its great weakness.
When it was born in 2009, it challenged as an ideology, possessing a total distrust towards banks and centralized authorities, which supposedly had the responsibility of ensuring the stability of currencies.
For bitcoin, there is no authority present that exerts regulatory effect on it.
Many believe that in order to preserve the value of money, it must have the backing of institutions that are capable and accountable to citizens. Central banks have to function as guardians of this public trust that should exist.
In this sense, bitcoin and its philosophy of existence are in contradiction.
This currency could be considered risky, due to the limitations of protection it has for investors and consumers.
- It is time to not only warn, but also to regulate, in order to control speculative pressure and to limit its possible uses in some way. Virtual currencies should be subject to rules or norms in a coordinated manner, requiring the provision of information, delimiting responsibilities and ensuring that the decisions of those who mine are subject to the regulator.
- Cryptocurrencies are not suitable at all, in view of performing functions as a means of shared payment or reserves of value.
It is important that both banks and financial authorities assess and study the links between digital currencies and traditional currencies, since there is the possibility that the latter achieve a parasitic relationship with the basic institutional structures of the financial system.
Bitcoin itself poses a systemic risk despite its limited size and few interconnections, digital currencies could be increasing its connection with the financial system, and significantly influencing its destabilization.
- It is a currency that should not become a possibility or alternative to legal tender currencies, nor precisely accept them as forms of payment against various debts or obligations. Its limited circulation and excessive fluctuation of its value mean that it cannot be considered a deposit of effective value or a stable unit of account.
- Bitcoin is not a good investment asset when compared to bonds and stocks, especially considering extended-term capital appreciation. This despite the fact that the currency has actually increased in value considerably over time. It will never be a solid investment.
Bitcoin is not in its prime. The expectation is enormous and it is not really known if we are just facing the bursting of a bubble that had already been anticipated, or the system will be adjusted again and everything will be normal again.
Something if it could be stated with enough certainty, and that is that the bitcoin world needs to fully analyze and re-scrutinize its strategy, to provide support to the currency that is already necessary.
Some think that all the current turbulent regulatory and restrictive situation will end up benefiting the currency, allowing people to have more faith in it, causing the price to rise again.
Some questions could be imposed at a time like this, where correctly handling the bitcoin phenomenon is so relevant, we leave two for your reflection.
To what extent will we currently understand this phenomenon correctly? Is there sufficient historical experience to deeply analyze such a secession, related to decentralized currencies?
very good post