February 21, 2015

By: Shahla Geoffrey

Conducting intensive research about the story of bitcoin’s invention and gathering information about what it is, how to use it, where it is traded, the Bitcoin Price Index and finally it’s current development has motivated me to write this article. It summarizes what I learned thus far, and my opinion about whether investing in bitcoin is a valuable investment based on the question; will bitcoin, also known as crypto-currency, change the monetary world by creating a monetary standard shift?

The story of bitcoin started with a gentleman called Satoshi Nakamoto who discovered it in 2011. Nakamoto fell in love with crypto-currency and his passion motivated him to explore new possibilities in the monetary world. His journey was eventually impacted by the rapid growth of bitcoin fans, investors and developers.

Bitcoin is the new electronic currency that is digitally owned. One of the major characteristics of bitcoin is that bitcoin’s community is decentralized meaning that no institution controls it, yet all bitcoin users can control it globally. The currency has a protocol and software, and anyone can review the code on the Internet. Bitcoin users are free to choose the type and version of the software they use. Bitcoin network includes the competitive mining market and the various subcultures within the Bitcoin community. Bitcoin is used to replace the tangible currency with a virtual one. Hence, consumers and retailers can use bitcoin for electronic trading and this electronic trading can be easily compared to the online shopping mechanisim by using the conventional euros, dollars or yen.

CoinDesk Bitcoin Price Index, CoinDesk BPI, reveals the average price of bitcoin across global exchanges in which bitcoin is traded and these two exchanges are XBT/USD and XBT/CNY exchange prices. The trading initially took place on July 18, 2010, and the market value closed at $0.0858. Today, which is December 3, 2014, the market price closed at $374.97. Owning the currency for less than 4 years, an investor would earn about $375 per 1 XBT, and return is equivalent to approximately 437 % measured in ROI. The highest closing price in the history of bitcoin’s trading was in December 04, 2013, when the market price reached as high as $1,147. Today, the market value of bitcoin decreased by 67% in comparison to the highest closing price, which occurred in December of last year. As shown in the graph above, the virtual currency’ performance as per the CoinDesk Bitcoin Price Index is volatile and too risky. The increase in bid prices of the currency means that there are more buyers. Hence, it indicates a bullish market trend.

Only in a short time horizon starting in November 2013 to December 2014, already five bitcoin ATMs were launched in Canada; Vancouver being the world’s first bitcoin ATM, Kelowna being the second bitcoin ATM local branch in BC, Toronto, Montreal, and Winnipeg. Bitcoin has been implemented in other locations in the world such as, London, UK and Seoul, Korea. A marketing research was conducted earlier in 2014 to investigate the potential spread of bitcoin virtual currency across Europe. In summary, the consumers and the retailers are not ready to use or implement bitcoin in Europe. Some countries in Europe have developed bitcoin technology, and those include Sweden and Finland while many other countries are still studying the potential plus-value of bitcoin and examples of these countries include Germany, Poland and France.

My overall recommendation of investing in bit coin is a strong yes, because the long-term success of bitcoin depends on the contribution of investors. Despite that many people are reluctant or resistant to use it in this moment in time, I believe that the take over of bitcoin on the common monetary bills that are currently used is inevitable. Bitcoin will dominate the world in the future because after all, it’s part of human nature to resist a major change as such. I would relate it to the lack of knowledge and trust. I like bitcoin because it has no transaction fees, is very fast and easy to use, is used globally, has no tax costs and finally has a digital aspect that goes very well with the technological revolution, which currently takes place.

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