Bitcoin Benefits from Eurozone Turmoil

Monday, 25 Mar 2013 11:53 AM

By Michael Kling

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At least one currency has benefited from the banking crisis afflicting Europe and Cyprus — the Bitcoin.

Amid the eurozone financial turmoil, the Bitcoin, a digital currency traded electrically between buyers and sellers, is becoming increasingly popular and valuable, increasing from $40 to $72 in two weeks, ABC News reports.

“The best-performing currency year-to-date has no home country, no central banker and no physical scrip,” Nicholas Colas, chief market strategist at ConvergEx Group, told ABC News.

Declassified:
‘Financial War’ Could Wipe Out 50% of Your Wealth’

The Bitcoin, he noted, is “clearly having a breakthrough moment here, and a deeply surprising one given its novelty and nascent infrastructure.”

The Bitcoin was believed to be invented by a programmer named Satoshi Nakamoto, perhaps an alias, in 2008. The currency is traded by using software on users’ computers and a decentralized network. Cryptographic techniques ensure security.

Supporters say the Bitcoin is the wave of the future and is especially well-suited for remittances, wire transfers and small payments.

“Imagine being able to pay 5 cents to read an article online instead of these ridiculous pay walls that require expensive monthly subscriptions,” Charlie Shrem, CEO of the payment processor BitInstant, told ABC News. “People will start reading the news again. Right now, you can’t do that. Try sending 5 cents over the Internet.”

But Diana Furchtgott-Roth, former chief economist for the U.S. Department of Labor and a senior fellow at the Manhattan Institute, noted the Bitcoin won’t save Cyprus. Leaving the euro, getting its own currency, and attracting investment are the best option for the country.

“It’s a gimmick,” she said. “The Bitcoin would never work in Cyprus because Cyprus is full of insolvent loans. Putting in different currency is not going to help. They would ideally have their own currency. Whether it’s digital or dollars, they need to separate from the euro and put in economic currency that will attract more investment.”

The Bitcoin’s future is uncertain. “We’re clearly in uncharted waters. But one thing is clear: Bitcoin is one more lens with which to assess the ongoing European financial crisis,” Colas said.

The lens shows fear and uncertainty.

Spaniards are embracing the Bitcoin, notes Bloomberg Businessweek, reporting that downloading of Bitcoin apps recently skyrocketed.

“This is an entirely predictable and rational outcome for what’s happening in Cyprus,” Colas told Bloomberg Businessweek. “If you want to get a good sense of the stress European savers are feeling, just watch Bitcoin prices.”

The rush to the digital currency is particularly notable since relatively few items can be purchased with Bitcoins, at least so far. Currency trading and a safe haven are its main uses.

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

© 2014 Moneynews. All rights reserved.

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