With high hopes of a cryptocurrency trading floor, Bitcoin, its investors and traders forced shares up over 17,000% in the last three months of 2017; becoming more valuable than the New York Times, at over 11 billion. It was a boom in digital currency, making the world question if it was the future of currency. Ironically, in the first months of 2018 though, Bitcoin dropped lower than it had since November of 2017, valued at below $7,000. These drastic changes forced economists to question Bitcoin; is it really the future of currency?
First, as displayed in the two differing values between 2017 and 2018, Bitcoin has a high volatility. The value of Bitcoins is shown to be proportional to the square root of its daily users. Therefore, the value that each Bitcoin is directly dependent on the amount of people that use it, causing it to be at risk for prices increases and decreases. With a current vested interest in them, prices were on the rise. That was until, the decline in early 2018 thus far. This decline is largely attributed to the cryptocurrency exchange ban by the People’s Bank of China. With a such a large bank, like the People’s Bank of China banning the exchange of Bitcoin, the future prospect of Bitcoin being the future currency is slimming. For people who invested in such a fluctuating currency, where does that leave these owners who have invested so much money into the rising company?
Well, these Investors can sell their Bitcoin, and hopefully make a profit on what they purchased it for, or they can keep them, and hope that the volatile nature of the Bitcoin will bring their investment back to profitability. For some investors, the purchase of Bitcoin is not solely for investment and economic gain.
For example, in countries like Argentina, citizens use Bitcoin to prevent their money and savings from being taken by the government. While this does profit safety from their government and its taxes, the sum of their savings is not protected. With the high volatility of Bitcoin’s values, their savings are not safe from the fluctuating values of Bitcoin. Their money's value could increase or decrease at any time. Thus, the constant worry surrounding your money is always at the back of investors minds, for if Bitcoin faces a drop in value, your money that is reflected in Bitcoin would diminish by one setback. Meaning that Bitcoin may not be the future of currency due to its unreliable oscillations.
Additionally, most banks associate Bitcoin with suspicious and fraudulent activity, so most do not allow accounts to be opened with Bitcoin. Therefore, it is hard to get your money from your Bitcoin if you cannot place them in a bank account. There are ways around that though, because although numerous large retailers do not accept Bitcoin, buyers can use services like Shakepay to convert Bitcoin to US dollars for a fee. Also, with the addition of Bitcoin ATM’s, you can withdraw money from your Bitcoin, allowing Bitcoin to catch ground. Yet despite the existence of these ATM’s, it can be a hassle to purchase things with Bitcoin, and thus it is a burden for one to use Bitcoin, suggesting that it will not become a universal currency as you can not use it everywhere.
In conclusion, as of the current state of Bitcoin, it is not plausible to assume that Bitcoin is the future currency of the world. It does not have anything to sustain its value, and is very volatile. Also, Bitcoin does not house any incentives for its use, so most people would not be willing to risk their money in the chance that prices of Bitcoin could plummet.
“Bitcoin Dips Below $7k Amidst News of China's Full Ban of Cryptocurrency Exchanges.” Cointelegraph, Cointelegraph, 5 Feb. 2018, cointelegraph.com/news/bitcoin-dips-below-7k-amidst-news-of-chinas-full-ban-of-cryptocurrency-exchanges.
Blumberg, Jonathan. “Here's how you can-and can't-Spend bitcoin.” CNBC, CNBC, 7 Dec. 2017, www.cnbc.com/2017/12/07/heres-how-you-can-and-cant-spend-bitcoin.html.
Popper, Nathaniel. “As Bitcoin Bubble Loses Air, Frauds and Flaws Rise to Surface.” The New York Times, The New York Times, 5 Feb. 2018, www.nytimes.com/2018/02/05/technology/virtual-currency-regulation.html.