As Tuesday saw, Bitcoin the leading cryptocurrency reach a new all-time high valuing itself at $50,000 a coin, what is the reason everybody is going crypto-crazy, and how can this impact the commercial industry in the forthcoming future?
Whilst the concept behind Bitcoin is simple, a digital currency that allows peer-to-peer transactions to operate freely ungoverned by any central authority, the practical use it can play in the commercial world is yet to be confirmed.
The virtual currency its early days was prominently used by illusive criminals on the ‘Dark Web’ offering encryption and protection to their anonymity, but recently has received interest and ultimately investments from multi-billion dollar corporations like Tesla.
Other financial institutions BNY Mellon and Morgan Stanley also became interested in integrating the currency into work operations, with Deutsche Bank outlining their plans to “fully integrated custody platform for institutional clients and their digital assets providing seamless connectivity to the broader cryptocurrency ecosystem”(World Economic Forum Report).
This has even attracted attention from payment organisations on the other side of the spectrum, with MasterCard and Paypal wanting a ‘bit’ of the market, showing significant signs in facilitating the coin through its services.
But the real question is why has it attracted this attention?
Historically the ideology of a currency being unregulated and ungoverned would have left investors running in the opposite direction, but yet it is on its way to becoming a trillion dollar asset subject to reaching $53,680 a piece. The attraction to the digital currency can be seen through the liquidity it offers, the immunity it has to inflation and the new opportunities it can bring. But in reality, although it brings forth an evolutionary change it can have in a digitally advancing society, it should be noted there is an ever-present risk. The sheer volatility Bitcoin brings makes the swings 15 times more riskier than that of the S&P 500 index (The Straits Times), and the fact its primary use is related to substantial amounts of cybercrime. This has caused doubters and non-believers in the digital currency.
The Financial Conduct Authority were the first to have their say against cryptocurrency. They banned retail consumers from ‘shorting’ and purchasing ‘futures’ of the coin, despite 97% of respondents disagreeing with the consultation ban after the first consultation! (Forbes)
But does this ban mean the UK’s commercial industry is against cryptocurrency?
Whilst this has certainly added another implication to promoting cryptocurrency in the UK, the decision was enacted due the volatile situation the UK economy is currently facing in light of Covid-19 and Brexit. The ban will subsequently limit the exposure of risk the economy is currently under, but doesn’t necessitate the end of cryptocurrency is near.
With other global corporations showing great interest, it’ll only be a matter of time before we see cryptocurrency transactions occurring regularly in the commercial industry, especially if the UK want to remain in a dominant position as a global fintech hub.
As Tesla’s CEO Elon Musk would say, Bitcoin to the Moon?