Bitcoin gives US dollar good virtual punch

Is there money stronger than the U.S. dollar? As evidenced by recent events, such currency exists and its value recently reached 900 U.S. dollars. This event has stirred up things in Washington. Congress hastily held a hearing to discuss the threat coming from the currency rapidly gaining strength in global trade and criminal activities.

We are talking about a virtual currency Bitcoin invented five years ago by a Japanese Satoshi Nakamoto and perfectly familiar to people who have to deal with exchange platforms and online trade. This most famous crypto-currency was worth less than $13 about a year ago. Since then Bitcoin's price has increased nearly tenfold and now ranges between $600-800. The record of last weekend when the rate of Bitcoin has reached a historic threshold of $900 can be called a real breakthrough in the global economy. Internet users are confident that this is not the limit, and the potential of Bitcoin is so high that in the future the U.S. dollar can be tied to Bitcoin the same way it was tied to gold.

This virtual currency is a real find for the criminal world because all Bitcoin transactions are made anonymously. No one really knows who is behind this huge money at the moment. These can be terrorists, drug traffickers, dealers, organ traffickers or other citizens who wish to hide their business from the regulatory authorities as Bitcoin is not controlled by any regulator. Perhaps the only thing that really undermines the reputation of Bitcoin in the eyes of its supporters and the fact particular stressed by the U.S. authorities discussing the risks of virtual currency is its speculating potential.

"I'm not interested in the speculating potential of Bitcoin, but as a means of transaction it is almost satisfactory for me. Hopefully the speculating talks wear off," said Life Journal user ellgree, stressing that otherwise he would not get involved with Bitcoin.

However, for people who prefer real and tangible economy over virtual one the potential of Bitcoin is not clear. "What is Bitcoin backed with? It is like a spherical horse in a vacuum, it's interesting, but it is unclear what can be done with it," said a Facebook user Well Perm.

There are also fairy tale-like stories about the enlightened citizens who see the economy as more than just actual trade relations and who once woke up rich by betting on the once young Bitcoin currency. A user Fedor Polozov said that he saw people who have bought this currency at 50 cents per piece. While they have not made millions, they've made tens of thousands of dollars.

Of course, knowing Bitcoin's quick path from rags to riches one can make up many such stories. Instead of indulging in fantasies, we decided to learn from experts in the field of economics and finance what were the prospects of Bitcoin in the real world, and what were its chances to move the U.S. currency from its pedestal.

"I think that this issue is a bit overestimated and this is rather a marketing project than an introduction of a virtual currency," said the professor of the Department of Stock Market and Investment of HSE Alexander Abramov. "We see that in fact the risks and violations are considerably higher here than with the traditional currencies and we are already seeing various schemes of market manipulation related to setting independent currencies. Frankly, this is interesting for me, but I think that in the next decade such currency will not be even a slight competition to the dollar or other currencies."

"It seems to me that this is a phenomenon of the Internet. The Internet provides the opportunity to launch a virtual currency to play with and tie it to the dollar. This is a game, but it can really generate income for those who play it. But as well as any other game, it is just that," deputy director of the Institute of USA and Canada Studies Victor Supyan told Pravda.Ru. "That is, there is no economic basis for it to become a full-fledged currency, let alone replacing the dollar. It is not supported by gold stock or assets of a country, of government Treasury bonds, nothing like that. So I think there is no reason for a serious talk about this "currency."       

This is the opinion of Russian experts. China, however, has a different opinion about Bitcoin. Here is a great Chinese trick: Bitcoin in China is actively used in B2B transactions, advertised and even accepted by some real estate agencies. It is hard to understand whether it is done out of spite to the dollar, or whether the Chinese are really hoping to achieve independence from the ubiquitous American currency. One thing is certain, the popularity of the virtual currency in the market of the second economy in the world has significantly promoted the growth of Bitcoin, and its rate depends on supply and demand. Who knows, perhaps the Chinese are much closer to the truth than the Russians, most of whom know nothing about Bitcoin, and when they hear about it they start thinking whether to make a bet on the virtual currency and become part of a large bubble that threatens the well-being of the U.S. dollar.

Maria Snytkova

Pravda.Ru 

Read the original in Russian