Cryptocurrencies are giving us the creeps. Word has spread like wildfire around the world about one such particular digital currency called Bitcoin, and how it has brought fortunes to some global currency market traders and risk-defying investors in a matter of days or weeks. But like any get-rich-quick schemes in the past, the Bitcoin temptation appears to have lured enough people into a bubble that is now threatening to burst big time in the face of greed.
Bitcoin is a form of money in the cyber world that is not tied to any asset or bank or government, but buying and spending it is legal in many countries, including the United States and the Philippines; it may be acquired and spent via the Internet to pay for any purchase transacted online, outside of any bank regulations or the need for a middleman.
It was invented in early 2009 with no intrinsic value by someone who introduced himself as Satoshi Nakamoto. Then a guy named Koch bought 5,000 bitcoins later that year for a total of $27, which in 2013 grew in net worth to $886,000, according to a report by MarketWatch. Trading in the virtual currency is run on the Internet by a technology called Blockchain. People have since been using it to book flights or hotels or buy any merchandise online. They can buy Bitcoins using any currency from marketplaces called “bitcoin exchanges,” and keep the virtual coins in their digital “Wallets,” which are virtual “bank” accounts that allow them to trade anonymously.
This month Bitcoin hit a peak of $19,000 on the Bitcoin exchanges. That shows how big the surge in its value has been since its price of $1,139.9 at the beginning of 2017.
That alone would spook any investor or trader worth his salt about the catch when this cyberfever blows over. Even Cinderella’s story has an element of agonizing hardships as a slave before she became a bride princess to a rich prince. The Bitcoin narrative is nothing like Cinderella’s story at all, but seems to make it too easy for one to become a dollar millionaire overnight – though one must have the smarts to play with a complex series of numbers that is the language of Blockchain.
Although every transaction is recorded in a public log, the record only shows the trader’s Wallet ID – his or her real name is not revealed. It is easy to understand why Bitcoin has become a favorite currency among hackers and those buying drugs or doing other illegal activities online.
Besides such concerns, much of the fear generated by Bitcoin among the mature investors and regulators is the extent of market speculation that has been driving the virtual value of this digital currency through the roofs.
A large part of the virtual currency’s surge is driven by hype, which should make people engaged in it worried. As an investment tool, it may not deliver what holders expect it to deliver, or could even spell bankruptcy if one is not alert and quick enough to get out.
That is why the Korean government started cracking down on Bitcoin trading this week, announcing on Thursday all cryptocurrency transactions must be done using real-name bank accounts, as reported by Chosun Ilbo. Seoul is also considering levying transfer and exchange taxes on cryptocurrency trading, as well as other options including calls to shut down exchanges, it said.
The Philippines has a tiny market for Bitcoin trading. The latest central bank data shows the monthly average transaction value of the Bitcoin has grown to $6 million this year from $2 million in 2015. But Bitcoin is now used for remittance services, which account for a big chunk of the country’s foreign currency inflows and fuels local economic activity.
Bangko Sentral ng Pilipinas governor Ernesto Espenilla Jr. admitted the other day the monetary authorities realize pragmatically that “even as we talk, it grows, whether or not we like it. So rather than prohibit something that is very hard to prohibit anyway, we chose to engage, and the industry has accepted that engagement to the BSP.”
We can trust the BSP to protect the Filipino market trading and using Bitcoin however tiny the local market is at present. It is good to know the central bank imposes obligations to fulfill anti-money laundering commitments.
But the temptation of quick, easy and tremendous windfall will always be present as long as the Internet is alive. Filipino traders and investors must heed the expert warnings to “invest responsibly,” and especially that part that says, “be scared when everybody’s greedy…”