Bitcoin soars in value as confidence in traditional currencies collapses
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There’s nothing quite like a crisis to throw up a range of creative, inventive solutions. As currency markets have yet another litter of kittens over the stability of the Euro and Cyprus waddles the tightrope, one currency is thriving. Bitcoin
With trust in central banks, currency traders and the global financial system at an all time low, it can come as little surprise that a means of trade and exchange developed within the self regulating shadows of the open source internet has small investors running to snap it up. With a general consensus that most global currencies may indeed not be worth the paper they are printed on, this historic plummet in trust has thrown up the rise of the Bitcoin – that works in its own cryptic algorithm. The key to the bitcoin is that you can’t just print more and utterly devalue the system. So no ‘quantative easing’ then.
Equally, with governments now apparently able to raid citizen’s bank accounts at any time, people are left with the two traditional options – under the mattress, buy gold and the new one – buying Bitcoin.
Two weeks ago, one Bitcoin was worth $40, then a record high. Today, it's worth $72, largely because of "incremental interest" from Euro and Russian ruble holders who are terrified by the situation in Cyprus, said Nicholas Colas, chief market strategist at ConvergEx Group, a financial technology company in Manhattan. It is outperforming 20 national currencies
"The best-performing currency year-to-date has no home country, no central banker and no physical scrip," Colas said.
And therein lies its strength. Possibly invented by someone who might possibly be called Satoshi Nakamoto and who might possibly have been a cryptography student in Dublin, it begins and ends as a closed system that genuinely operates within the vectors of a free market without state interference to skew value.
Charlie Shrem, the CEO of BitInstant, a payment processor for Bitcoin exchanges said
"Let's say you have someone in Cyprus who badly needs money," Shrem said. "How are you going to get that person money? There's not enough cash going around. Bitcoin can and will be used as a barter, or maybe a collateral tool."