Bitcoin's Gains May Fuel Central Bank Concerns

[hawkeye]

Bitcoin's Gains May Fuel Central Bank Concerns: Chart of the Day
http://www.bloomberg.com/news/2013-...l-central-bank-concerns-chart-of-the-day.html
By Max Raskin
An increase in the value of bitcoin, the world's largest online currency, may fuel concerns that virtual money could undermine the role of central banks.
The CHART OF THE DAY shows that bitcoin has more than doubled in the past 12 months, strengthening to $16.37 from $5.88, according to data from Mt. Gox, the world's largest bitcoin exchange. The money, issued by a decentralized network of computers, has recovered after falling to $2.14 in November 2011 from a high of $29.58 five months earlier.
Enlarge image
A European Union flag flies outside the European Central Bank (ECB) headquarters in Frankfurt, Germany. Photographer: Ralph Orlowski/Bloomberg
Chart: Bitcoin Value
Greater demand for virtual currencies could have a negative impact on the reputation of central banks, according to a report published by the European Central Bank in October last year. Since the report was released, bitcoin has risen more than 55 percent against the dollar and use of the currency has surged.
Bitpay Inc., a bitcoin payment processing company that recently raised $510,000 in an investment round, this month announced that the number of companies using its services has increased almost 50 percent to more than 2,000 since November, when blog management firm WordPress.com said it would accept the digital currency.
"I think the ECB obviously is concerned, and it's not reputational," said Steve Hanke, a professor at Johns Hopkins University in Baltimore who helped to establish new currency regimes in countries such as Argentina and Bulgaria. "I think it's a competitive threat. Maybe virtual currencies will be so convenient that they will pose a threat because of their ease of use."
Virtual currencies "could have a negative impact on the reputation of central banks" if their use grows considerably, the Frankfurt-based ECB said in its research paper. "This risk should be considered when assessing the overall risk situation of central banks."
To contact the reporter on this story: Max Raskin in New York at mraskin5@bloomberg.net
To contact the editor responsible for this story: Alexandre Tanzi at atanzi@bloomberg.net

 

[Yippe-Ki-Ya]

I have to wonder why so many here reckon that bitcoins will never work?

Looks to me as if they're already working

 

[hawkeye]

I have to wonder why so many here reckon that bitcoins will never work?

Looks to me as if they're already working

If I had to hazard a guess, I think it's the "not being physical" part. Some equate it with government fiat, but it's not a valid comparison.

Also, not understanding how it works.

 

[Midnight Man]

I have to wonder why so many here reckon that bitcoins will never work?

Looks to me as if they're already working

If I had to hazard a guess, I think it's the "not being physical" part. Some equate it with government fiat, but it's not a valid comparison.

Also, not understanding how it works.

^^ I reckon you hit it in one Hawkeye - unless you do a fair bit of reading on what it is and how it works and how to participate, it's easy to draw conclusions based on bad assumptions.

Whilst I know there's a fair bit of material out there already, it needs to become more widely known - that, IMO, is Bitcoins next big challenge... there's a good core nucleus of businesses ready and accepting Bitcoins, it's now about "spreading the word".

 

[goldpelican]

Would you consider them a store of wealth though given their volatility? I looked into accepting them as a payment method, but they added an unnecessary exchange risk for precious metals dealing.

Could look into it for Silver Stackers memberships though.

 

[Midnight Man]

Would you consider them a store of wealth though given their volatility?

Personally, for me, not at the moment. I see now as an opportunity to take some slush money, obtain some, and hold on the basis that a truly limited currency - *IF* it gains acceptance and popularity, should rise in value.

Considering there is an absolute limit of 21,000,000 bitcoins, and knowing some have already been lost beyond recovery, means that if they succeed, I'd expect to see considerably higher prices for one that ~ AUD$20.00

It's not something to bet the farm on though, it *IS* a gamble based on the future success of the currency, so I'm not prepared to put big money down, just a bit here and there that I can fully afford to lose.

 

[hawkeye]

Would you consider them a store of wealth though given their volatility?

No, not at this point in time. Still very speculative what the true value of them is and the market is too small. Too much volatility as you say. Not that different from silver though in that respect.

I think it has potential to fill that role eventually though.