If you have been following the media this week, you probably saw a flood of bitcoin related articles. Why this became the news, all of a sudden? After examining the latest valuations of bitcoin over the last couple of days the reason for the spike became clear. Because that's where the money is. Well, at least according to a significant number of Chinese investors. Fact is that based on rumors of a potential devaluation of the renminbi, China saw bitcoin as a way to hedge. That, helped by the uncertainties of investments in Britain given Mrs. "Maybe" latest comments about "Brexit", boosted the valuation of Bitcoin, which now accounts for USD 19B after a 146% growth in 2016. It is still a very modest amount, but the expectations are high. Very high.
The benefits of a digital currency in capital markets are hard to dispute. Bitcoins can be purchased in 2 hours with 2% cost in fees in average. So let's say you want to move some funds overseas and you need to choose between a business as usual fund transfer, that takes in average 72 hours and around 15% fee cuts and, bitcoins, that comes with a cherry on the top of having no central regulation? Under this light, the security risks of a cryptocurrency look worthwhile. I guess that under this light, we all become a bit Chinese.
The real challenge though is physical. This is quite odd considering that we are talking about a virtual coin, isn't it? But it is hard to say otherwise if the distributed infrastructure placed today to support the system can barely exceeds more than 27 transactions per second. Valid to say that this peak number relates to an enhanced version of bitcoin. The infra available today accounts for no more than 7 transactions per second.
No wonder why the word in town is that bitcoin should never be considered as a retail currency but as an investment currency, like any other high priced commodity in your diversified portfolio. Personally, I am an advocate of that position and the borderless aspect of bitcoin is a huge plus to the mix. On top, the volatility of the currency, which was very vivid last week, proved that the model is not tailored to mass consumption. However, I can't stop thinking about how much of the physical constraints that I have mentioned before are shaping the advice to take bitcoin as an investment alternative. My impression is that we are experiencing something like "make the feet fit the shoes"? Meaning that fingers may be shortened, if necessary. Are you willing to make the sacrifice?
Net, we have a long way ahead to mature and the digital payments segment is booming with different sort of solutions, especially in the retail market. So, in the meantime, let's explore the sound benefits of a distributed ledger beyond the digital currency arena, shall we? And for god's sake, if you still believe that bitcoin is a niche coin used only in the darknet, wake up! That ship has sailed! Bitcoin is now on the top of the pyramid and big bucks are shifting towards it. So watch out!
MR