One thing that shook up the financial world in 2017 was Bitcoin—the cryptocurrency you cannot touch or carry. CEOs of major banks were commenting on it, and the media started to give the digital asset extensive coverage. After all, its price rose from $952 at the start of the year to over $16,000 by the time this article was being written. Given its volatility, I should be forgiven if it increases or decreases by the time you read this piece. And herein lies its biggest issue: its volatility and unpredictability.
Any asset that shoots up over 1,500% (yes, that’s right) in less than a year will attract attention. The fact that it has gone up more than 15 times is because it got attention and attracted money. This is how trading works. And this is all Bitcoin is at the moment—a share being traded in the 21st century. It is stock for the young generation that doesn’t like waiting, that is used to the internet at millions of bytes per second and that has an attention span that shorter than a goat’s.
Since it is a volatile asset, with major fluctuations in price every single minute, it is unlikely to be used as a currency. No one likes selling an asset that would increase in value the next second, especially if, in return, you have bought something that would perish with consumption. Similarly, no one would want to sell any asset in exchange for a Bitcoin if the price of it is likely to go down. But can anyone really be sure where the price is headed?
The chairman and CEO of JPMorgan Chase, one of the world’s largest banks and financial services firm, recently said that he “doesn’t care” about it. He believes in Blockchain technology, the online platform through which assets can be transferred digitally within a minute, but not in Bitcoin itself. His reasoning; he doesn’t see any “value” in it. One could argue that the dollar has no intrinsic value and it’s only as worthy as people think it to be. The piece of paper itself means nothing. But the issue remains its acceptability.
Right now, Bitcoin isn’t as widely accepted as a means to transact as the dollar is. Since it is a deeply volatile asset, it is unlikely to be used as currency. At least not right now. Also, Bitcoin will remain limited in supply. There are only 21 million coins available to be ‘mined’. Mining is the process through which coins are made available to transact in. Currently, close to 17 million of the 21 million coins have been ‘mined’. Here too, the mining is doing digitally on super computers that consume a substantial amount of electricity.
With so many issues and complications, wide acceptance of the Bitcoin, especially in a country like Pakistan, is unlikely. A majority of the population is unbanked and has no access to a formal financial institution. The government is tackling challenges of a very basic nature and understanding something as sophisticated and technologically advanced as the Bitcoin remains a challenge.
Internationally, governments are also looking to address the increasing fame of Bitcoins. Some countries and big vendors are looking to embrace it. But there remain many challenges. Since it is done electronically, issues of money-laundering, evasion of taxes and terror financing are likely to remain major challenges. Authorities like to know how much money is being put in by whom for many reasons. With Bitcoin, the level of secrecy, and security alike, is and has to be immense. Otherwise, the coin loses a lot of its charm.
In Pakistan, there are a number of people currently involved in its trading. Urdubit, the online trading platform, is among other exchanges providing the service to trade in Bitcoins. It reported a surge in traffic this year with volume of trading also picking up.
Regardless of the surge in interest, there is little understanding as to what a Bitcoin really is.
It is digital currency that can potentially put the entire financial world in a spin. The dollar along with gold stand to lose ground if cryptocurrencies take over in everyday life. Already, there is an interest in using Bitcoins as gifts and payments within and outside of Pakistan.
For now, it remains an unregulated, untamed and a volatile digital asset susceptible to hacks and massive price movements. But for those who have had it since it was worth around a dollar, it is nothing but a Godsend to resolving their financial woes. The market capitalisation – value of all Bitcoins – has already exceeded $273 billion. That is almost as much as the entire Pakistani economy. It is powerful and can put major banks out of business. Is it safe? Perhaps. Is its acceptance increasing? More than there was before. But is it also a bubble? Maybe. When all questions are asked together, there is no answer that satisfies both the supporters and detractors of Bitcoin.
Any asset that shoots up over 1,500% (yes, that’s right) in less than a year will attract attention. The fact that it has gone up more than 15 times is because it got attention and attracted money. This is how trading works. And this is all Bitcoin is at the moment—a share being traded in the 21st century. It is stock for the young generation that doesn’t like waiting, that is used to the internet at millions of bytes per second and that has an attention span that shorter than a goat’s.
Wide acceptance of Bitcoin, especially in a country like Pakistan, is unlikely. A majority of the population is unbanked and has no access to a formal financial institution. The government is tackling challenges of a very basic nature and understanding something as sophisticated and technologically advanced as the Bitcoin remains a challenge
Since it is a volatile asset, with major fluctuations in price every single minute, it is unlikely to be used as a currency. No one likes selling an asset that would increase in value the next second, especially if, in return, you have bought something that would perish with consumption. Similarly, no one would want to sell any asset in exchange for a Bitcoin if the price of it is likely to go down. But can anyone really be sure where the price is headed?
The chairman and CEO of JPMorgan Chase, one of the world’s largest banks and financial services firm, recently said that he “doesn’t care” about it. He believes in Blockchain technology, the online platform through which assets can be transferred digitally within a minute, but not in Bitcoin itself. His reasoning; he doesn’t see any “value” in it. One could argue that the dollar has no intrinsic value and it’s only as worthy as people think it to be. The piece of paper itself means nothing. But the issue remains its acceptability.
Right now, Bitcoin isn’t as widely accepted as a means to transact as the dollar is. Since it is a deeply volatile asset, it is unlikely to be used as currency. At least not right now. Also, Bitcoin will remain limited in supply. There are only 21 million coins available to be ‘mined’. Mining is the process through which coins are made available to transact in. Currently, close to 17 million of the 21 million coins have been ‘mined’. Here too, the mining is doing digitally on super computers that consume a substantial amount of electricity.
With so many issues and complications, wide acceptance of the Bitcoin, especially in a country like Pakistan, is unlikely. A majority of the population is unbanked and has no access to a formal financial institution. The government is tackling challenges of a very basic nature and understanding something as sophisticated and technologically advanced as the Bitcoin remains a challenge.
Internationally, governments are also looking to address the increasing fame of Bitcoins. Some countries and big vendors are looking to embrace it. But there remain many challenges. Since it is done electronically, issues of money-laundering, evasion of taxes and terror financing are likely to remain major challenges. Authorities like to know how much money is being put in by whom for many reasons. With Bitcoin, the level of secrecy, and security alike, is and has to be immense. Otherwise, the coin loses a lot of its charm.
In Pakistan, there are a number of people currently involved in its trading. Urdubit, the online trading platform, is among other exchanges providing the service to trade in Bitcoins. It reported a surge in traffic this year with volume of trading also picking up.
Regardless of the surge in interest, there is little understanding as to what a Bitcoin really is.
It is digital currency that can potentially put the entire financial world in a spin. The dollar along with gold stand to lose ground if cryptocurrencies take over in everyday life. Already, there is an interest in using Bitcoins as gifts and payments within and outside of Pakistan.
For now, it remains an unregulated, untamed and a volatile digital asset susceptible to hacks and massive price movements. But for those who have had it since it was worth around a dollar, it is nothing but a Godsend to resolving their financial woes. The market capitalisation – value of all Bitcoins – has already exceeded $273 billion. That is almost as much as the entire Pakistani economy. It is powerful and can put major banks out of business. Is it safe? Perhaps. Is its acceptance increasing? More than there was before. But is it also a bubble? Maybe. When all questions are asked together, there is no answer that satisfies both the supporters and detractors of Bitcoin.