Since its IPO seven years ago, bitcoinBitcoin is commonly said to be a cryptocurrency, a digital means of exchange developed by a set of anonymous authors under the pseudonym of Satoshi Nakamoto, which began operating in 2009 as a community project (Wikipedia type), without the relationship or dependency of any government, state, company or body, and whose value (formed by a complicated system of mathematical algorithms and cryptography) is not supported by any central bank or authority. Bitcoins are essentially accounting entries i... More
has registered a dramatic take-off. While it was first traded at $0.07 in July 2010, the virtual currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More
rose to a remarkable high of $2,955 just yesterday (June 12th, 2017). If you do the math, someone who bought $100 worth of bitcoins in 2010 now owns no less than $4.6 million. The rise has especially accelerated in the last few months – the price has more than doubled since April – which led economists to warn against a possible bursting of the bitcoin bubble.
Experts put various theories forward to explain this phenomenon. Firstly, it could simply be a speculative craze similar to the 17th century tulip bulb mania. In such a case, buyers are attracted by the spectacular price increase, no matter what the asset is. Nevertheless, it is more likely that bitcoins serve as a store of valueOne of the functions of money or more generally of any asset that can be saved and exchanged at a later time without loss of its purchasing power. See also Precautionary Holdings. More
, just as gold. Indeed, as bitcoins are not managed by any central bank, they are extremely appealing for investors who mistrust monetary authorities’ policies. Finally, bitcoin also represents an exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More
currency, alongside the dollarMonetary unit of the United States of America, and a number of other countries e.g. Australia, Canada and New Zealand. More
or the euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More
. Indeed, regulators are starting to consider bitcoins like any other currency, following the example of the Japanese government. Last April, Japan passed a law to accept bitcoin as a legal payment methodSee Payment instrument. More
, which was backed by major retailers. Russia is also seeking to regulate the virtual currency.
Nevertheless, cryptocurrencies represent a real ongoing experiment and no one can predict the dangers blockchainAn unchangeable digital record where transactions are processed and verified by a network of independent computers rather than by a single referee. This decentralised structure has been described as an open distributed ledger. It supposedly enhances security as there is no single entity to be hacked. It also protects personal identity and guarantees that governments can’t block transactions or otherwise manipulate the payments space. The blockchain is the underlying technology supporting most ... More
technology. Investors run the risk of losing everything should a breach ever occur. In addition, if regulators don’t react, cryptocurrencies could end up suffering from their bad reputation of being used exclusively by criminals to conduct activities anonymously.