This year was hard for bitcoin. The value of cryptocurrency recorded a decline of 60% since January. At the time, bitcoin was traded at $1,000 and now it estimated at just nearly $309-$312.
Bitcoin is inferior if compared to US dollar, which is easier to use and has relatively stable price. Joe Carter from Acton Institute PowerBlog writes:
“Right now, Bitcoin is only mostly dead. As an investment, it was the worst of 2014. As a currency, it was destroyed by the IRS by a single sentence (“For federal tax purposes, virtual currency is treated as property.”). All that really remains is for it to become a financial network. But then it will be likely killed (i.e., all dead) with one word: regulation.”
However, bitcoin should not be rejected. Besides, it should not be perceived as a new type of currency, instead, it is rather the first open financial network.
Such open platforms, as bitcoin have a potential for innovations. Thus, when the Internet was invented in 1980s, most people did not believe in the future of the idea, but through years it has proven to become one of the most important developments in the world.
One of the potential bitcoin applications is its use for cross-border payments. While such companies as MasterCard and Visa imply high fees for international transactions and about 30 minutes to implement transfers, bitcoin transactions include low fees and are realized instantaneously.
Besides, bitcoin is a prospective mean of payment for everyday purchases. A lot of merchants have already integrated the cryptocurrency and bitcoin startups are constantly working on simplifying the process of bitcoin usage by merchants.
Moreover, it is possible to cope with the problem of bitcoin volatility. For instance, such financial services, as BitPay, allow merchants setting prices in fiat currency and convert it to the equivalent of bitcoin at the time of purchase. This means bitcoin users are not affected by the cryptocurrency price changes.
In spite of bitcoin price declines, bitcoin proponents are still optimistic about the future of cryptocurrency.
“The financial industry is subject to constant change. In 2013, Bitcoin was the best opportunity to invest money, while this year it has become almost the worst investment after the Russian ruble. That’s true, but it doesn’t mean bitcoin must be written off. It is still in use and is being invested in,” said CoinSpeaker’s co-founder Egor Pavlovich.
“When Euro first appeared, the situation was similar. Until the currency hardened, its price fluctuations were equal or even greater than those of bitcoin. As for the cryptocurrency technology, it’s absolutely priceless and it is yet to be fully embraced,” he added.
The US now has huge control over the financial networks, as many international transfers are realized in US dollars and are vulnerable to the pressure of US government.
David Cohen, an undersecretary for terrorism and financial intelligence at Obama administration, said in his recent speech: “Financial institutions everywhere need dollars to serve their customers, and thus require access to U.S. banks through correspondent accounts to settle their customers’ transactions. That means that foreign banks are especially attuned to our sanctions,” he added.
As of bitcoin, regulators don’t know how to treat the digital currency. They always perceived bitcoin as an experiment. But once bitcoin will pose threat to the established payment networks, the regulators would change their attitude and issue guidance on cryptocurrency to isolate it from the regular financial system.
However, Tim Lee stated at Vox: “Bitcoin will only grow enough to be economically significant if a lot of legitimate businesses start to rely on it. But the more legitimate users the network has, the more politically difficult it will become to shut it down.”