Tuesday, October 17, 2017

Will governments crush bitcoin?

Bitcoins and other cryptocurrencies (there are several hundreds of them currently) have become the “hot item” of the day. Bitcoin is a currency that will have a finite supply, the number of bitcoins in existence is not expected to exceed 21 million (currently there are about 12.5 million of them). A highly sophisticated computer algorithm is run to “mine” or create a bitcoin, and with each iteration, it becomes more complicated to create. Partly because of this, bitcoin’s value has grown exponentially – from US 10 cents exactly seven years ago to around US$5,700 currently (and rising). This virtual currency has had several periods of strong growth - for example, over the past week its price in US dollars jumped by almost 25%.

Because of this many people have for a long time been talking about a “bitcoin bubble”. One prominent critic of bitcoin, JPMorgan Chase Chairman and CEO Jamie Dimon, has taken this issue quote personally and has proclaimed the future demise of bitcoin several times over the past three years.

But is bitcoin really going to burst, and when, or will it become a legitimate currency? The answer seems to lie in the pace of bitcoin’s progress. A week ago, Jamie Dimon said that bitcoin is not a big deal yet - his bank JPMorgan Chase moves about $6 trillion in money around the world daily while trading in bitcoin is currently at just about $1 billion daily.
But as Dimon expects, there will be a time when “governments are going to crush it”. And why? Because “governments like to control their currency, like to control their own economy.” It is difficult to see where the underlying support exists for bitcoin’s value, but it seems to be tied to the algorithm and the eventual scarcity in its supply. There are some vendors worldwide that have begun to accept bitcoin for transactions. It is curious, whether bitcoin’s mysterious creator/s Satoshi Nakamoto himself (or herself or themselves) has a good idea about how long this will last and how will it all develop.

Ukrainian Credit Union Limited

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