Bitcoin’s evolution from a cybercurrency struggling to make a dent with investors to its current star status on Wall Street is making headlines around the world. Up well over 300% this year alone, the cryptocurrency is finding the media spotlight to be a bright one. Mainstream and niche journalists are covering the hype surrounding bitcoin with a dedication some could say even U.S. President Donald Trump might envy.
In fact, bitcoin (BTCUSD) is now considered the “most crowded trade,” as measured Tuesday by the monthly Bank of America Merrill Lynch survey of 200 global fund managers (http://nnw.fm/ZI3oT). That translates into a lot of investors jumping on the bitcoin bandwagon. It’s not hard to understand the thrill of the cyber chase. After all, on January 1 of this year bitcoin traded for between $900 and $1,000. By Tuesday morning, the cybercurrency was trading just above $4,300. Check out that math.
Bitcoin’s use of blockchain technology plays a leading role in the cryptocurrency’s favored status among investors. Every transaction is anonymous and peer-to-peer. The system automates trust through an electronic ledger that can’t be altered, isn’t subject to any existing financial authority and can be used anywhere bitcoin is accepted. There are even a couple of Swiss municipalities willing to allow residents to pay their taxes in bitcoin, although there is a limit on how many bitcoin the town will accept (http://nnw.fm/1Ybnj).
However, with approximately $155 billion in cryptocurrencies currently in circulation around the world and bitcoin claiming $78 billion of it, governments are taking a closer look at this virtual currency and its lack of regulation. Initial reports from Chinese media that the government plans to shut down domestic cryptocurrency exchanges caused concern on Wall Street, but its long-term effect has yet to be fully understood (http://nnw.fm/o2yLr).
Sun Guofeng, director general of the People’s Bank of China’s research institute, in an interview Tuesday (http://nnw.fm/3F3Cs), said the central bank’s move to ban the practice of creating and selling digital currencies or tokens to finance start-up projects “should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology.”
So, as cryptocurrency investors await clarification from the Chinese government, economists at the central Bank of Finland are calling bitcoin’s economic system, “revolutionary.” With the currency operating on a blockchain, the researchers contend that the system is safe (http://nnw.fm/rENl1), because it is “a monopoly run by a protocol, not by a management organization.”
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