The value of a unit of the web-based crypto currency ‘Bitcoin’ has exceeded the value of an ounce of gold for the first time.
Last week, the markets recorded the value of a unit of Bitcoin at $1,268, compared to a troy ounce of gold at $1,233. A troy ounce is an imperial unit measure of the mass of a precious metal.
What is Bitcoin?
Bitcoin is a digital web-based currency that operates without the need for central banks and uses highly secure encryption (a crypto-currency) to regulate the currency units and to verify transfers of funds. Bitcoin uses the ‘Blockchain’ technology. Blockchain is an open and programmable technology that can be used to record transactions for virtually anything of value that can be converted to code and is often referred to as a kind of ‘incorruptible ledger’.
There are approximately 15 million Bitcoins in existence, and in order to receive a Bitcoin, a user must have a Bitcoin address (of which there is no central register). This address consists of a string of 27-34 letters and numbers, which act like a virtual post-box, to and from which the Bitcoins are sent.
The Benefits of Bitcoin as a currency for users are that payments can be transferred easily and quickly and anonymously (because it is outside of central banks and government control), across borders, continents and time-zones.
Relatively New and Fluctuating
As a relatively newly introduced(2009) model of currency, Bitcoin has taken some time to gain popularity.
After a tenfold increase in its value in only two months and a surge in value to $1,163 back in 2013, Bitcoin has had its share of turbulent waters.
Predictions of its possible demise and a fall in the value of Bitcoin were fuelled by its collapse on the MtGox exchange in Japan in 2014 as a result of a hack.
Despite a crack-down on Bitcoin trading by Chinese authorities who feared that it was being used to channel money out of the country illegally, Bitcoin surged to reach new heights.
In January this year, the value of 1 Bitcoin received a 2.5% boost and jumped above $1,000 (£815) for the first time in 3 years. Bitcoin’s recent boost in value means that its total worth of $16 billion is around the same value as that of a FTSE 100 company.
Currency experts attribute the latest big rise in Bitcoin’s value to a big increase in demand in China due to the fall in the value of the Yuan in 2016. This has been the Chinese currency's weakest performance in more than 20 years.
Bitcoin is also now looking like a viable alternative to cash in countries that have a shortage of it (e.g. India, which had high denomination bank-notes removed from circulation in November).
What Does This Mean for Your Business?
For businesses, Bitcoin has many attractive advantages such as the speed and ease with which transactions can take place due to the lack of a central bank and traditional currency control.
Using Bitcoin also means that cross-border and global trading is simpler and faster and the ‘crypto’ aspect of the currency makes it secure. Bitcoin’s decrease in volatility in recent times, plus the widening of popularity and potential uses for its underlying technology ‘Blockchain’ mean that Bitcoin looks increasingly attractive to businesses and governments in 2017.