Believe it or not, bitcoin, the Internet (digital) currency, is now worth a lot more than an ounce of gold. That is, at least for now. As of Monday of the penultimate week, one bitcoin traded at $2,157, at a time when gold was trading at $1,250 an ounce.
The price of gold reached an all-time high of $1,920, and that was on 6 September 2011. As of the time of writing this article on 1 June 2017, the bitcoin exchange rate is $2,443, and the price of an ounce of gold is $1,320. Thus, despite the ups and downs with bitcoin, the currency seems to be here to stay, as it does not seem that any governments can stop bitcoin trading. Moreover, there are now bitcoin traders virtually everywhere in the world.
Note, however, that because bitcoin trading is completely anonymous, except when you want to exchange it for the standard currencies – Yen, Euro, Dollar, Naira, or Pound Sterling – the currency has attracted the interest of “bad guys.” The WannaCry ransomware hackers demanded the ransom payments in bitcoin because of the anonymity.
This column in Daily Trust has religiously followed the development of bitcoin since the past 5 years – a few years after the cryptocurrency was created. Notwithstanding violent fluctuations in the value of the currency and the various attacks by some governments, bitcoin may not be going anywhere. To catch up on the various articles that have appeared on bitcoin over the years in this column, you can google-search the following ones. On 10 December 2012, we published “Bitcoin: The reality of digital money;” followed by “Understanding bitcoin,” 2 December 2013; “Exploding interests in bitcoin,” 17 February 2014; “Whither bitcoin trading?” 4 May 2015; “Understanding bitcoin adoption,” 24 April 2017; and “Minting bitcoin,” 1 May 2017.
Only a maximum of 21 million bitcoins can be minted by the Year 2140. Out of this cap, as of 6 February 2016, 15.2 million bitcoins have reportedly been in circulation. Thus, minting bitcoin becomes much more difficult. In the article in this column on 1 May 2017, I went into the details of how bitcoin is minted. However, just as you do not bother yourself with how Naira or the dollar is minted – since you are only concerned about earning them by selling your goods or services, or spending them – you shouldn’t be concerned either with minting bitcoin. You can focus on earning it or spending it if you have it.
Bitcoin exchanges can be found all over the world, from Lagos, Nigeria, to New York, USA; via Europe, South America, or Asia. You just need to go to the web, and in a few steps, you are trading. However, I cannot overemphasize the need to exercise caution when you trade in bitcoins. You will want to be sure that you are using a legit exchange; meaning you have to do your homework. It was comforting to note that most of the exchanges, for example in Nigeria, have a relatively low ceiling for the amount of bitcoins you can buy.
The other real issue with bitcoin is its volatility. When the most recent article on bitcoin was published in this column on 1 May 2017, the exchange for one bitcoin was $1000. So, in 30 days, the value had fluctuated by over one hundred percent.
The fluctuation is in the positive direction this time around, but it could also go in the other direction. Imagine buying one bitcoin at $2,443 today, only to see it lose its value to half of this in a few weeks. You would have been had. Just like stocks, the value of bitcoin fluctuates, as stated above. However, it seems that, like stocks, if you hang in there for long, you might see a net appreciation. So, in a sense, bitcoin could serve the dual role of being a currency and also an investment tool.
There is an impending issue with bitcoin that you should be aware of. A significant number of miners are running Bitcoin Unlimited, which is popular, but controversial, alternative bitcoin software. So, are we going to have two competing bitcoins? Such a fork in the currency will certainly confuse traders, some of whom are probably already liquidating their bitcoin assets because of this development.
Daily Trust
