The bitcoin diaries continue, and latest chapter in the drama is the China crackdown. China finally transitioned from bark to bite and ordered their largest bitcoin exchange, BTC, to stop accepting Yuan deposits. This is a continuation on what appeared to be just a load of posturing by China in the past, which by itself significantly affected the trading price of the crypto-currency.
Bitcoin faithfuls woke up to see their hope of the future trading in the mid $400 price range. Surprises like this are becoming somewhat normal for the digital currency, and this one is ironically caused by the same big player (China) which caused the last major drop in bitcoin’s trading price. The last time the Chinese government hinted about curbing the use of the digital-dough, the price was cut nearly in half overnight. Since that time bitcoin die-hards have been touting the currency’s comeback to its highs in the four figure range.
The Mt Gox exchange bore record of the bloody blow to bitcoin, showing the currency trading as low as $455 before it began to make a miniature comeback into the $500 range. The recent volatility so easily brought about is sure to serve as ammunition for critics of the crypto-currency, who have long argued now that it is a poorly understood instrument being used by individuals who do not possess adequate knowledge of the investment world.
Bitcoin’s drama filled journey has certainly lived up to its unpredictable nature once again with its recent display of unexpected volatility. Despite China’s move to hamper the progress of the crypto-cash, bitcoin fanatics, with their previous displays of loyalty, can be expected to stay on the bitcoin bandwagon until it either tanks or takes over.
Those critical of the digital money monster are using the recent moves by China to highlight the naivety of investors and those dreaming of a digital wonder world economy. Nay-sayers claim that the crushing blows dealt quite effortlessly to bitcoin by China expose its significant volatility and shortcomings. Critics also claim that those who continue to see the crypto-cash as a viable long-term medium of exchange are out of touch with reality. Those who would use bitcoin in a speculative manner as an avenue to wealth also draw heavy criticism from others not so enamored with the crypto-currency.
The recent moves by China are being characterized as the bursting of a bubble, suggesting that bitcoin was until now enjoying fundamentally unsupported success. No doubt however, bitcoin believers will view these recent events as simply a speed-bump in the currency’s journey to full acceptance. What can be agreed on temporarily by both supporters and critics alike, is that China has exposed at least the temporary volatility that exists in bitcoin which wise users will consider carefully. Users of bitcoin are now forced to conisder the heightened exposure and vulnerability which China has brought to their attention.
Many negative charges have been leveled against the digital-dough, claiming it can be used for criminal activity like money laundering and that it facilitates other illegal behaviors. These charges however assume however that bitcoin provides something new that the present systems of cash, drugs, guns, and shares cannot facilitate, and this assumption appears a bit unsupported.
It would seem that a much greater potential problem may arise with the use of digital currency. At present, even with its decreasing use, cash can still provide a fairly high level of privacy and freedom in one’s economic life. Although it can be argued that with Edward Snowden’s recent revelations, no such privacy exists any longer, cash still provides a non-digital private vehicle of exchange. This level of privacy is already significantly eroded when one makes the transition from cash to credit or debit cards. Cards leave footprints at every point of use, however unlike totally digital-dough they can still be used with a relative amount of anonymity (i.e. gift cards).
At present, bitcoin’s story seems as though its being written to show that the only thing stopping it from enjoying a bright future is government’s lack of acceptance and endorsement. This appears to be an ironic piece of reverse-psychology to those who view bitcoin skeptically.
The levels of control which would be possible with totally digital money however, would appear to represent a much higher potential problem than the propensity of bitcoin-style money to facilitate illegal transactions which function just fine within the present financial structures. With digital money, tyranny would have the potential to reach previously unimagined heights.
The latest chapter in bitcoin’s drama, the China crackdown, keeps the story of digital currency an interesting one, and as the pressure mounts against the statutory stitching which holds together the fraying financial systems of the world, more and more eyes will be watching bitcoin with interest.
By Daniel Worku