The proposition of swapping out gold for bitcoin in an investment portfolio borders on preposterous if you consider the increasingly neurotic nature of the crypto marketplace, and its vulnerability to criminal manipulation – not to mention the understated fact that virtual money doesn’t actually exist. Moreover, it isn’t recognised by most governments and therefore isn’t legal tender. Nevertheless, it appears that the global preoccupation with trading gold is waning, and is facing opposition from the Bitcoin psychosis – a modern day Klondike gold rush. Growing numbers of investors are gravitating towards, or at least evaluating, the potential gains in the cryptocurrency arena. Regardless of differing perspectives from economists on the liquidity of crypto investments, and the definition of their intrinsic value without authority recognition, Bitcoin is still appealing.
Many market commentators – rightly or wrongly – have dismissed the bitcoin phenomenon entirely, and claim it’s just imaginary money, which is currently in an expanding bubble driven by avarice that will inevitably burst when the value evaporates. However, cryptocurrencies allure doesn’t solely rely on its value alone. There is a rather seductive and fanciful notion of financial liberation, maybe even a little anarchic in perception. As the majority of governments and financial institutions are guilty of historical mismanagement of some kind – call it what you will – there is a sense of determined resolve for change in the air. The arrival of blockchain technology brings with it the opportunity to create the conditions for wide scale decentralised banking, which may lead us into believing we could do better ourselves. The cold reality however is that the world governments aren’t about to stand by and allow anyone to start trading money anonymously without taxation.
Recently, financial experts based in Dubai were vehemently advising against being sucked into the bitcoin euphoria. The UAE Central Bank has warned the public in the same way, describing Bitcoin as an unofficial currency that lacks supervision – we can’t argue with that. In the United States of America, the SEC – Securities and Exchange Commission – has declared that it has no plans to accept cryptocurrencies as securities, and this means that they are not subject to U.S. securities law. The confusing ambiguity within the message involving the legitimacy and governance of virtual currency tokens is a little unsettling. A clear directive covering IOCs as a fund-raising tool for building a decentralised open protocol has not been forthcoming, especially where companies are effectively pre-selling products – building a token on a blockchain. The absence of any real clarity and the seemingly endless abundance of enthusiasm for cryptocurrencies have inadvertently caught the authorities in a pincer movement demanding some progress. The likelihood of legislative regulatory intervention being harmful or even fatal to the virtual money brigade is distinctly unlikely, but the fear of it is probably responsible for the stalemate on the issue. Meanwhile, Bitcoin and Ethereum autonomously march on.
There is a heavy weather front heading the way of cryptocurrency as speculation mounts regarding the news of long term investors shedding peer-to-peer money during positive periods. A further agonising blow was dealt by BIS’s – Bank for International Settlements – warning that “digital currencies may never serve as a bona fide medium of exchange.” BIS cited instability and susceptibility to manipulation as the deciding factors to their opinion. However, there is some interesting news being reported by Coinbase – a digital currency exchange – in the US relating to the custodianship of cryptocurrency, which Coinbase and others have identified as the final obstacle to attracting new investment. If stringent US standards for qualified custodianship are met, and subsequent approval is given, it could herald a long awaited pivotal moment in financial history, which defines the cryptocurrency landscape and potentially unlocks a tidal wave of capital.
