(Notice: it is older article)
A golden era for Bitcoin. Its value overcame the border of 6000 USD per Bitcoin. The reason is once again the cleavage of the cryptocurrency, as early as this Wednesday the new Bitcoin gold is going to arise. The principle of the Bitcoin gold is very similar to the one of the Bitcoin cash, but the philosophy beyond these two cryptocurrencies is different. At the first cleavage, it was intended to increase the block capacity to 8MB and to adjust Bitcoin to be used for transactions. It was only temporarily successful. Now, the Bitcoin cash is disused because the transactions take up less than 1MB in the blocks. I anticipate the second cleavage to result alike. In this case, it was intended to decentralise the decentralised currency. Why? Because the mining of Bitcoin is controlled only by few companies with the highest computational force. Jack Liao, the man in the background of miners, who made a decision to create the Bitcoin gold, wants to change it by modification of the Bitcoin setting. Bitcoin will be no more mined only through graphic cards and by this, the mining will become more decentralised. If you are asking what is behind, the answer is, as usual, politics and vested interest. Besides the fact that Jack Liaos company manufactures the hardware specialised for Bitcoin gold, his miners already managed to mine 200 000BTG probably to sell them immediately after the cleavage.
Factually, by arising of new Bitcoin nothing essential happens, since we are talking about a fraud more or less. Despite this, the price has risen quickly. In my opinion, the majority of investors speculates and therefore transferred their portfolios into Bitcoin. This is because in the time of cleavage, they will get the Bitcoin gold in a ratio in which they possess Bitcoin. Now, everybody is waiting to receive it with intention to sell it straight afterwards. (It is important to say that cleavage is not supported everywhere so it is necessary to keep the Bitcoin on the right place.) Implementation of Bitcoin and interest of the Media mainly in the context of regulations and usage is also behind the price growth.
The president of the World Bank Jim Yong admitted that Blockchain could be very useful nowadays, however, he is afraid of Ponzi schemes in case of derivatives as Bitcoin. Cryptocurrencies really become worthy of interest, the International Monetary Fund president Christine Lagarde sees potential in them (specifically in Bitcoin) to transform financial systems and markets. Christine Lagardes attitude towards cryptocurrencies regulation looks also positively.
Furthermore, it is not only the IMF or the World Bank interested in Bitcoin, but more and more states. For instance, Slovenia would like to become the EU leading country in terms of the Blockchain. It was more accurately presented by Slovenian prime minister Miro Cerar within the strategy Digital Slovenia 2020. In an island-state Vanuatu you can buy a citizenship, with which you can travel into 113 countries without visas, for 43 Bitcoins. In an another island-state Mauritius, its central bank is going to use Bitcoin as a collateral, which is from my point of view hard to imagine since there still exists the volatility problem with the cryptocurrency.
There is also Bahrain, Sweden, India or Japan which is very influential in trading. Last but not least, let us talk about Venezuela, which does not want Bitcoin, but it helps the people to get out of the misery caused by socialism. Estimated inflation in Venezuela in September was approximately 2400%. According to the decentralised market called LocalBitcoins, 1.1 million USD was traded there in the last week of the same month. If we look at the map on the webpage coinmap.org, which shows places connected with Bitcoin worldwide, it is clear that there are more and more stores accepting Bitcoins in Venezuela. Likewise the number of miners in the country is increasing currently estimated at 100 000.
Despite the fact that many people think opposite, I do not believe in Bitcoin as real money with its rigid setting (21 million Bitcoins) and possibility to represent similar harm as an inflationary currency. Imagine a situation in which you, as an entrepreneur decided to borrow 60 000 USD in Bitcoins a year ago. You would have needed circa 100 Bitcoins plus interest, for example 5%. Today you would have to pay 105 Bitcoins back, but theirs value would be 600 000 USD. It looks like a nonsense. We can also reverse the conditions, if the value of the Bitcoin dropped 10 times, you would be happy but your lender would be certainly not. There will never be a relevant Bitcoin loan market, neither if we would account the profits and revenues in the Bitcoin. If so, another problem arises, Bitcoin would destabilize the interest rate, meaning the loan market would exist only for a short time. But this would cause the functional structure to disintegrate. Long period loans are important due to their support of relatively more effective projects, which need more time and money to be set up. Bitcoin short period loan market would make this impossible, unless the people would choose the bigger misery. Bigger misery = shorter production cycles = shorter period loan market. Bitcoin is not good money, but an important technology that can offer many solutions in the field of finance.