Polina is an undergraduate student at Belarusian State Economic University (BSEU) where she is studying at the faculty of International Business Communication for a degree specializing in Intercultural Communication. In her spare time she enjoys drawing, music and travelling.
The adoption of cryptocurrency is held back by the governments regulation and banks, refusing to deal with bitcoin businesses.
Bitcoin has recently been called the worst investment of 2014, showing even worse performance than Russian rouble. The price of the cryptocurrency fell by over 50% since the start of 2014 and is now valued at about $330. In spite of such a difficult year for bitcoin, the number of merchants adopting the digital currency has increased.
Some consider the bitcoin price changes to be normal, attributing the volatility to the larger amount of bitcoins in circulation.
Meantime, other analysts consider the price drop is due to a number of reasons. The cryptocurrency can’t reach mainstream adoption, as it is slowed down by the government regulations. Thus, the value of bitcoin started decreasing back in December, 2013, when the Chinese government put a ban on it.
The majority of the main world banks are closing the companies related to the bitcoin industry, as they tend to avoid regulations and fines. Bitcoin businesses often face the challenges with opening bank accounts.
Global Advisors Jersey Limited (GAJL) stated that HSBC has recently closed its bank account. The company’s director, Danny Masters, told CNBC that HSBC said GAJL no longer met the “risk reward” profile of the bank and was a “potential money laundering risk.”
Simon Hamblin, the CEO of exchange Netagio, is unsure it’s the regulation that holding banks back, reports CNBC. “No one really knows. What is the banks’ requirements for these (bitcoin) companies? I don’t know if even they know.”
Bitcoin Foundation director Jon Matonis told CNBC: “This stems from attitudes about bitcoin and its original source of funds. No bank wants to be fined in this current political atmosphere.”
In the first years of bitcoin development, the mining process was quite easy for developers and average hobbyists to carry out. It required having a desktop computer, featuring a powerful graphics chip or CPU.
With the growing number of miners, such companies as KnCMiners and BitFury, started producing ASIC chips for running mining software. The process of mining was easy for bitcoiners and often brought high revenues. It was a simple way to enter the bitcoin industry.
But the things have changed. Within time, the reward for each block of mined bitcoins has been declining. There are now nearly 3,600 bitcoins mined per day, however, the competition has grown during the last year. Today, the typical miner is an operator of data centers with a capacity of 10-20 megawatts of energy.
The smaller miners are forced out of the market due to the number of reasons, including the declining bitcoin value and the increasing mining investments. Besides, the hobbyists often face the problem of high electricity cost. Thus, in the US kilowatt hour is priced at 13 cents, while in Germany and the UK, the price is even higher.
Meantime, the consolidation among miners is expected to continue during the next year, with more acquisitions and mergers to be observed.