CRYPTOCURRENCIES
FX Fig.4
Bitcoin prices have surged in response to geopolitical or macroeconomic turmoil.
Cyprus EU bailout, 2013
Speculation can be traced back to 2013, when CNNMoney suggested that a climb of 80% in the price of Bitcoin was precipitated by concerns over the financial state of the small Mediterranean nation Cyprus.
Greek debt crisis, 2015 A few years
economic uncertainty
later, more in
Europe led Reuters to report that Bitcoin’s volatility was not just normal fluctuation, but a reaction to news that Greece was likely to default
Earlier this year, the US Government shutdown led some to suggest that, in the words of Scott Galloway, Bitcoin was acting as a “Chaos Proxy” that responded to loss of faith in centralised institutions
A valuable commodity, a useless currency?
Despite recent technical developments that promote the use of Bitcoin as a currency for daily transactions, these price movements suggest that in fact Bitcoin is more aptly categorised as a commodity. This view is
on its debts.
US Government Shutdown, 2018.
supported by recent events in the cryptosphere, with wild price fluctuations and high fees leading the likes of Microsoft and Steam to axe crypto payment options (although Microsoft have since restored this option.) Meanwhile, a top South Korean court have recognised cryptocurrency as an asset with measurable value, if only so it can be confiscated from criminals.
Those who believe that Bitcoin is first and foremost a currency, might argue that
before widespread
adoption can occur, Bitcoins value must be universally recognised in the form of a commodity. With the coming regulation, greater trading volume from institutional investors, and ever-growing infrastructure, volatility will inevitably reduce. At which point, Bitcoin might come closer to fulfilling Satoshi’s original vision of a “peer-to- peer electronic cash system”.
In other words, becoming a commodity could be one step towards becoming a currency.
Kieran Smith Cryptocurrency specialist FX TRADER MAGAZINE July - September 2018 49
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