Since its birth in 2009, Bitcoin has begun changing the face of US and worldwide finance. The banking community has differing views on its growing user numbers, volatility and evolution of companies favoring Bitcoin.
Although Bitcoin had little or no dollar value in the beginning, its value has increased since inception. Even global consulting firm Deloitte has weighed-in on the subject, claiming Bitcoin is developing its own “ecosystem,” which includes retailers, lenders and financial institutions.
Along with a growing user base and rising value, Bitcoins popularity has been fueled by increasing media attention. Although primarily an Internet phenomenon to date, expanding attention from print and electronic media has increased its notoriety.
For example, media attention helped drive the price of a single Bitcoin to over $1,100 near the end of 2013. The market wisely determined this price was inflated and during 2014, although its volatility continued, prices generally declined to more reasonable levels. Banks—and
The growing use of this alternative currency has supporters and wary opponents. Supporter identities vary. Although predominantly individuals and an increasing base of retailers, increasing entities favor Bitcoin for its rebellious nature, as a perceived viable alternative to government-sponsored currency, such as the US dollar.
However, the expanding Bitcoin network, evolving to a global level, is making banks and governments more wary than ever. This currency even attracted the iconic global news outlet, The Guardian, after single Bitcoin prices rose to $147 in 2013, before pricing broke the four-figure level. At the time, The Guardian called the Bitcoin phenomenon “one of the most intriguing things to have happened in cyberspace” since the royalty-free music of the peer to-peer networks or the furor created by Wikileaks.
Bitcoin’s Mysterious Founder Nakamato
While the alleged mysterious Bitcoin founder, known as Satoshi Nakamato, disappeared from the Internet by April 2011, only two years after creating this virtual currency, the Bitcoin ball was rolling—and has continued since. No one has publicly disclosed to being the missing Nakamato or even if he is (or was) a 36-year old Japanese male he (or she) claimed to be.
Supporters and opponents alike generally agree that “Nakamato” is (or was) a world class C++ programmer with a solid understanding of economics and peer-to-peer networking. Others contend there must have been a talented team that created Bitcoin or “Nakamato” is a genius. The venerable magazine, The New Yorker, called the entity “Nakamato” a “preternaturally talented computer coder” for having the expertise to create “all bit and no coin” virtual currency.
Totally controlled by software, most observers agree the creation of Bitcoin was driven by the anger and frustration of the global finance crisis (the Great Recession). The apparent goal: Create a currency impervious to volatile government politically-fueled monetary policies or “greedy” bankers. The term “miners” quickly came to be known as people wanting to accumulate Bitcoins.
As US and global interest escalated, quickly over forty exchanges, permitting those with Bitcoins to trade them for government issued currencies, such as dollars or euros. As more merchants began to accept this alternative currency, the value of Bitcoins began to escalate rapidly by 2010.
While most bankers remain unconcerned, some may fear, if left unchecked, Bitcoins could threaten the public trust needed to validate government-issued currencies. In addition to acceptance for purchases, government currency also depends on the integrity of central banks, like the US Federal Reserve.
Since Bitcoin has become a global phenomenon, should public trust dissipate, numerous currencies could suffer. While not close to a reality, such loss of trust, remains a perceived potential threat to the US dollar, UK pound and Europe’s euros. Whether real or mistakenly perceived, the impact on the world’s banking community could be significant should it grow in popularity.