Will bitcoin still fulfill its promise?

There is plenty of interest from potential investors, but for the time being the lack of opportunities to easily trade in bitcoins is hampering the digital currency.

While the market for the traditional currencies is determined by the developments in the trade war of US President Donald Trump, the digital currencies are a plaything of stock watchdogs and investment banks. Last week, the US SEC single-handedly ensured that a rise of bitcoin was nipped in the bud.

The regulator postponed the decision on the introduction of a Bitcoin ETF. The price was hit again by a negative report from investment bank Goldman Sachs. According to the bankers, the currency will fall further because it does not fulfill any of the 3 traditional functions of money: medium of exchange, means of calculation and store of value.

High peaks, deep valleys
Of the bitcoin a means of storing value depends on the period you are looking at. Over the past 1,5 years or more, anyone who has held their fortune in the currency will be delighted. Since the end of 2016, bitcoin has risen by more than 500%. Over the past 3 years that is even more than 2.000%.

In the short term, however, a very different picture emerges. Since peaking at nearly $20.000, the coin has lost about 66% of its value. With this kind of fierce price movements, it is not surprising that people are reluctant to pay with bitcoins. The person who was the first to settle in bitcoins will in any case regret it like hairs on his head.

$60 million pizza
On May 22, 2010, computer programmer Laszlo Hanyecz paid 10.000 bitcoins when ordering 2 pizzas, which converted the transaction value to approximately $41. Nowadays are bitcoins worth over $60 million. Although much has been written recently about new possibilities to use the currency as a means of payment, the greatest opportunities lie in new platforms that make bitcoin accessible to more investors.

For example, the New York Stock Exchange has already started a partnership with Microsoft, and also with coffee chain Starbucks. In addition, Goldman Sachs is said to be planning to establish its own bitcoin trading desk.

Bright future
While the uncertainty surrounding the ETF's cancellation is putting pressure on prices in the near term, several ETF initiatives indicate that there is so much investor interest that the currency may have a bright future in the long run. In addition, much depends on the attitude of central banks.

The Chinese central bank has already closed some exchanges, while bankers in Canada and Great Britain have praised the blockchain technology, which runs bitcoin. All parties in the financial markets are unanimously optimistic about the potential of blockchain. Unfortunately, you cannot trade in it as easily as in (crypto) coins.

Lawrence Martins

Laurens Maartens is a currency expert at the Dutch Payment and Exchange Company (NBWM). Maartens analyzes current currency developments and also provides lectures and training in the field of currency management.

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