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The rush to the digital currency
There is no universally-valid reference exchange rate for bitcoin. The digital currency is traded on special online markets such as BitStamp or ItBit. For a long time the exchange rate barely moved, until the first hype kicked in at the start of 2013. Within 12 months, the value of a bitcoin shot up from around USD 20 to over USD 1,100 at some points. After that, admittedly, a correction phase began that took the bitcoin back down to around USD 200 by the middle of 2015. However, this reversal was not proclaiming the death-knell of the digital currency - following this brief lull, the price trend has since been almost uninterruptedly upwards. And there was a veritable explosion in the exchange rate this August, when the blockchain was split into the previous bitcoin and the newly created cryptocurrency, bitcoin cash. Since the start of the year, bitcoin has increased in value by over 600% (effective 15.11.2017).
A bubble, or just the start?
Hype of this kind also brings out the sceptics. Whereas for the cyber fan community bitcoin is only at the start of the boom, others are warning of a crash. The US billionaire Howard Marks, for instance, compares the current rush with the dotcom bubble at the turn of the century – and he should know, since he predicted the bursting of that bubble. “Digital currencies are nothing but an unfounded fad,” says Marks. One thing is pretty well undeniable: the cryptocurrency is highly speculative, and in our parts of the world it is not yet even an official means of payment. That said, the rapid growth in users and transactions argues in favour of bitcoin. And an additional argument in favour is that the digital currency is becoming increasingly socially acceptable – not only because there is a growing trend for companies to accept bitcoin as a means of payment, but also because interest is growing in the capital market too. Thus applications have been filed with the relevant authorities in the USA and Switzerland for licensing of bitcoin exchange-traded funds (ETFs). Moreover, according to media reports the Moscow stock exchange is currently working on an infrastructure for trading in cryptocurrencies. These developments underline the growing importance of bitcoin. Finally, and crucially, bitcoin is independent from the vulnerable banking system. With payment transactions being handled via the blockchain, it effectively makes the banks superfluous.
A glowing comparison
From speculation to payments to pensions, many areas of application are attributed to bitcoin. Due to the manufactured scarcity of the cryptocurrency, experts often like to make a comparison with gold. Similarly to the precious metal, bitcoin promises a high degree of privacy. The network only ever knows the public address and the contents of a wallet, but not its owner. In principle, the payment transaction is comparable to gold passing from one set of hands to another; the difference being that the persons involved do not need to be in the same place. Parallels to precious metals can also be drawn with regard to the increasing interest from states such as Russia or China. The motive could be, just as with the widespread hoarding of gold, independence from the US dollar.