{"id":415537,"date":"2017-09-07T00:12:50","date_gmt":"2017-09-07T00:12:50","guid":{"rendered":"https:\/\/ghana-mma.com\/2017\/09\/07\/what-you-need-to-know-about-the-latest-bitcoin-boom\/"},"modified":"2017-09-07T00:12:50","modified_gmt":"2017-09-07T00:12:50","slug":"what-you-need-to-know-about-the-latest-bitcoin-boom","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2017\/09\/07\/what-you-need-to-know-about-the-latest-bitcoin-boom\/","title":{"rendered":"What you need to know about the latest Bitcoin boom"},"content":{"rendered":"

<\/p>\n

The notoriously volatile crypto-currency has been making headlines with its skyrocketing value, but some believe it\u2019s a bubble driven by speculation (Credit: Getty Images)<\/p>\n

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You may have noticed reports about Bitcoin\u2019s value recently \u2013 its price is headed into the stratosphere.<\/p>\n

The crypto-currency\u2019s recent meteoric price rise over the summer has seen one Bitcoin go from being worth $1,500 in early May to more than $5,000 over the weekend, before dropping to $4,654 at the time of publication.<\/p>\n

And that has got all kinds of people interested \u2013 people like Andrew Beckwith, a DJ who goes by the name Supersede. \u201cI play restaurants, lounges, nightclubs, corporate events,\u201d he says.<\/p>\n

<\/p>\n

But he also invests. Beckwith has just taken his first step into the world of crypto-currencies, having converted $100 into Bitcoin.<\/p>\n

\u201cI don\u2019t know how far it\u2019s going to grow,\u201d he explains, \u201cbut if something is growing at hundreds of per cent, that\u2019s a pretty valuable return.\u201d<\/p>\n

Bitcoin is notorious for its volatility, but the recent peaks are unprecedented. In late 2013 its value jumped from around $100 to $1,000 \u2013 a bigger percentage increase \u2013 but it is worth more than four times that today.<\/p>\n

\u201cRecently there\u2019s been a lot more talk in the media and others have been investing,\u201d explains Kiran Varughese, another amateur investor, who works for an elevator company in Dubai.<\/p>\n

A friend\u2019s experiments with Bitcoin piqued his curiosity so he clubbed together with another pal to invest $1,000 in August. If they lose it, he says they won\u2019t be too worried \u2013 the potential for a big return within the next few years is too tantalising for Varughese to resist.<\/p>\n

But are investors like Varughese and Beckwith taking too much of a risk by buying into Bitcoin, and other crypto-currencies like Ethereum, Litecoin or Dash? Is there something about these digital currencies that underpins their soaring prices or are they simply subject to whims in the market that can make fortunes but also devastate them?<\/p>\n

\"(Credit:<\/p>\n

Photo:\u00a0Mining Bitcoin takes time and computer processing power, so it\u2019s often done in massive farms such as this converted warehouse in Moscow, Russia (Credit: Getty Images)<\/span><\/p>\n

While the market capitalisation of all crypto-currencies now stands at $150 billion, they still occupy a strange space in the world of finance.<\/p>\n

\u201cEvery year Bitcoin continues to exist is something to take note of,\u201d says Garrick Hileman, a research fellow at the Cambridge Centre for Alternative Finance at the University of Cambridge. \u201cIt\u2019s a significant achievement for Bitcoin to have survived the many setbacks and challenges that it has faced.\u201d<\/p>\n

One of these challenges occurred recently when Bitcoin split in two. It happened after the Bitcoin community became divided over how to allow more transactions to be processed with the currency. Because Bitcoin has no over-arching authority that controls it, any decision to alter the system that underpins it needed to gather enough support from Bitcoin users to go ahead. The system itself is called the blockchain \u2013 a huge digital ledger that records every single Bitcoin transaction in history.<\/p>\n

As computers on the Bitcoin network verify transactions, \u201cblocks\u201d of data are added to the ledger, storing this information. Computers that do this work receive a small sum of bitcoins as a reward \u2013 this is the process known as mining. Every single computer on the network has a copy of the blockchain and their copy of it is constantly updated.<\/p>\n

But until recently, Bitcoin blocks were limited in size to a megabyte every 10 minutes, meaning that the rate at which the blockchain could grow was capped. In early August, a new version of the crypto-currency \u2013 Bitcoin Cash \u2013 was mined for the first time. Its blocks can be up to eight megabytes in size.<\/p>\n

Some believe the smooth transition through this \u201cfork\u201d without any technical disasters has contributed to renewed confidence in Bitcoin, in turn helping to pump the price up. One \u201ccoin\u201d of Bitcoin Cash is worth less, around $630 today, but that\u2019s up $200 since its inception a month ago.<\/p>\n

Another fork to upgrade the block size further is expected in November and if successful, it might have a similar impact on Bitcoin\u2019s buoyant price.<\/p>\n

But \u201ccurrencies\u201d like Bitcoin aren\u2019t really playing the role of a traditional currency at the moment, says Vili Lehdonvirta, an economic sociologist at the Oxford Internet Institute, which is part of the University of Oxford.<\/p>\n

\u201cWhen I called up a restaurant in Helsinki earlier this year to ask if they accept Bitcoin, the response was that they tried it a few years ago, nobody ever used it, and thus they no longer accept it,\u201d he explains.<\/p>\n

BBC Capital contacted 10 businesses in London that have advertised an ability to accept Bitcoin in the past. Four of them said they had stopped accepting and two that did accept them reported hardly ever processing such payments.<\/p>\n

Instead, it appears many people are simply speculating on Bitcoin \u2013 investing in what is a relatively high-risk asset in the hope of a short-term gain in profit. But lucrative outcomes are by no means guaranteed \u2013 and many still think that Bitcoin is just a bubble.<\/p>\n

\"(Credit:<\/p>\n

The pound dropped sharply after Brexit \u2013 since Bitcoin is not tied to any one nation-state, it\u2019s less affected by large political events (Credit: Getty Images)<\/span><\/p>\n

In the short-term there may be various reasons why people are buying in while the price is buoyant. Some may like investing in a currency unconnected to nation states, suggests Hileman. It could be seen as good insulation against uncertain political developments that can cause traditional currencies to plummet dramatically \u2013 as happened to the British pound in the aftermath of the Brexit vote. Volatile international disputes, such as those involving North Korea, could be driving people to put their money elsewhere.<\/p>\n

\u201cIf you\u2019re in South Korea and you\u2019re concerned about a geopolitical event, do you trade in the US dollar?\u201d asks Hileman. \u201cMaybe that\u2019s not a great idea because the US will be involved, as will China and Japan, so it\u2019s not surprising to see people look for alternative currencies,\u201d he says.<\/p>\n

Applied cryptography consultant and Bitcoin-watcher Peter Todd says some are also attracted by Bitcoin\u2019s independence for broader political reasons, too.<\/p>\n

In an uncertain world, people\u2019s financial freedom is sometimes limited by their governments. Take India, which recently tried to curb public investments in gold as this was harming the nation\u2019s economy. Bitcoin is a global entity, no one government can fiddle with it \u2013 although there are countries where trading it is illegal.<\/p>\n

Still, crypto-currencies remain associated with plenty of risks that go beyond their volatility. Many people store their bitcoins in online exchanges and should these be hacked or go bust, which has happened more than once, then the money is often lost forever.<\/p>\n

With all the technical ups and downs of crypto-currencies \u2013 their changes and potential to split into new currencies for example \u2013 there is also a significant degree of complexity that can leave less informed investors bewildered.<\/p>\n

A new area of excitement, known as initial coin offerings (ICOs), are also beginning to worry some experts. ICOs allow owners of crypto-currencies to invest in fledgling companies, with many using Ethereum as their digital coin of choice. However, ICOs have already been associated with a number of scams and hacks, and China just banned them, calling ICOs ‘illegal fundraising’.<\/p>\n

\u201cI think the main thing we\u2019re seeing in ICOs is straight-up fraud,\u201d says Todd. He is concerned about efforts by regulators to clamp down on this because such an approach could backfire and encourage scammers to become more sophisticated.<\/p>\n

\u201cIt\u2019s when things look legit that they get dangerous,\u201d he says, pointing out that a few years ago Bitcoin and other digital tokens had more of a \u201cWild West\u201d feel to them, which perhaps meant people were less likely to be duped since scams were crude and easy to spot. As more and more investors get involved in crypto-currencies, scams can get slicker and the natural wariness that can keep people cautious may also diminish.<\/p>\n

Bitcoin and other crypto-currencies are gradually cementing their stated position \u2013 providing a radical new alternative to the investment options that existed before them. But there is no certainty as to how this massive experiment will play out. Though when did that ever stop hopeful investors taking a punt?<\/p>\n<\/div>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\u0642\u0627\u0644\u0628 \u0648\u0631\u062f\u067e\u0631\u0633<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The notoriously volatile crypto-currency has been making headlines with its skyrocketing value, but some believe it\u2019s a bubble driven by speculation (Credit: Getty Images) You may have noticed reports about Bitcoin\u2019s value recently \u2013 its price is headed into the stratosphere. The crypto-currency\u2019s recent meteoric price rise over the summer has seen one Bitcoin go […]<\/p>\n","protected":false},"author":0,"featured_media":415538,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-415537","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"\nWhat you need to know about the latest Bitcoin boom - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2017\/09\/07\/what-you-need-to-know-about-the-latest-bitcoin-boom\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"What you need to know about the latest Bitcoin boom - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"The notoriously volatile crypto-currency has been making headlines with its skyrocketing value, but some believe it\u2019s a bubble driven by speculation (Credit: Getty Images) You may have noticed reports about Bitcoin\u2019s value recently \u2013 its price is headed into the stratosphere. 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