The price of Bitcoin is like Boris Johnson: unpredictable. The cryptocurrency has enjoyed a spell in the sun in recent months, surging past $5,000 (£3,600), but has also endured stormy outbreaks that have pushed prices down to as low as $2,900.
It looks like more uncertain days are ahead for Bitcoin as news emerged yesterday that it might split into three in November. The digital currency split into two, Bitcoin and Bitcoin cash, in August resulting in a steep decline in prices.
The biggest Bitcoin bugbear for investors is its price volatility. Ray Dalio, founder of the world’s largest hedge fund, said this week that “bitcoin is a bubble” and an ineffective “storage of wealth”. However, the key problem with the cryptocurrency is the lack of mass adoption. It’s supposed to be the currency “by the people, for the people” yet we’re a long way off popping into the local pub to buy a pint using the currency. How many London businesses do you know of that accept payment in bitcoin? A few Shoreditch coffee shops, perhaps.
Bitcoin believers argue that one advantage it has is that it’s a cheaper way to transfer money. Yet if you want to convert it into pounds at your nearest bitcoin ATM, if you can find one that is, you’ll end up paying transaction fees of up to nine per cent. The bad press it gets for being associated with money-laundering and hacking doesn’t help either.
JP Morgan boss Jamie Dimon recently lambasted Bitcoin as a “fraud” currency used by murderers and drug dealers. His comments came after security experts warned that North Korea is utilising bitcoin to avoid sanctions. It’s no wonder that governments like China are eyeing a total shutdown of Bitcoin exchanges. The other side of bitcoin is the innovative blockchain “ledger” technology that underpins it.
Six of the world’s largest banks are working on a “utility settlement coin” to improve financial markets and central banks are also looking at the technology. The currency needs more projects like these if it’s to become trustworthy and stable.
Until then, it will continue to be used for PR stunts such as the “first ever celebrity jeweller” accepting Bitcoin payments or the “only Londoner selling their home” using the cryptocurrency.