Is Bitcoin Bad for Greece?

Would switching from the euro to bitcoin be a bad move for Greece?

Techcrunch recently posed this question, and while the writer makes some valid arguments, it’s quite possible that the entire situation is not being looked at.

For one thing, the publication makes it plain and clear that the euro is, at this time, Greece’s currency of choice, and that the main problem with it is that Greece cannot print more euros in order to thwart deflation.  Only the European Central Bank has the power to do that.  The article then suggests that Greece should persuade the bank to print more euros for its people.

It seems that with a statement like this, the entire point of bitcoin is being missed.  This is clearly a situation that is being controlled by the bank in question; where the bank is being handed more power.  Bitcoin is meant to dissuade this practice and place more power into the people’s hands.  If there is indeed a lack of euros in Greece, then it’s probably safe to assume that the country bares its fair share of unbanked citizens, and bitcoin would likely fix that problem.  While it may be too much of a push to abandon the euro altogether in a country like Greece, dual usage of the euro and bitcoin simultaneously would likely add to the country’s economy and build up the financial plane of the people.  It’s true that if Greece were to switch to bitcoin completely the country would have no control over how many bitcoins are issued.  After all, it has been stated that no more than 21 million bitcoins will ever be in existence, but the only consequence one might see is if the euro was abandoned altogether, which is not only a poor idea, but unlikely.

bitcoin, greece, greece bitcoin, bitcoin integration, euro

Acceptance of both bitcoin and the euro appears to be the answer.  Abandoning one for the other would appear to have damaging consequences, but the institution of both the euro and the bitcoin together in Greek society is likely to aid in the financial stimulation of the country.

As the article states:

“Bitcoin is not a currency for a government; it is a global currency for the people… Bitcoin gives people everywhere an alternative.  Anyone with a smartphone can hold bitcoin as a refuge from a currency that is losing value.  This sends a message to their governments: ‘Let’s have our own currency, but manage it responsibly, because now we have a choice.’”

It is true.  Bitcoin is the currency of the people.  It gives more power to the people, and places more control in their hands just through the simple use of something like a smartphone.  If indeed people do have a choice as the article suggests, then it is unlikely they will choose to dismiss bitcoin altogether, but rather see to its integration alongside their own national currency as we have witnessed in areas such as the United States.  The U.S. has not abandoned the dollar.  It has merely paved a way for bitcoin to join the ranks.

While bitcoin is not likely (nor is it meant) to completely replace a country’s main form of currency, especially at this time, it is meant to provide advantages and benefits that a national currency cannot, and bitcoin can serve as a prominent “sidekick” in the financial arena.

Image Courtesy of Google Images

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According to Brian Kelly, CNBC contributor and author of the book “The Bitcoin Big Bang”

“Bitcoin is the most important innovation in the history of money.”

This is a huge statement considering that, for many, the bitcoin is nothing more than a speculative fraud.

The power of the bitcoin lies in its technology

In an interview given to Entrepreneur, Brian Kelly made it clear that the power of the bitcoin lies in its revolutionary technology, which can effectively support the financial system. With the blockchain technology, the bitcoin transactions are allowed between two anonymous parties without the need for an intermediary person. Therefore, even if people who are using the cryptocurrency are not actually realizing it, they are contributing to the infrastructure of the new financial system.

Bitcoin game changer or a bitcoin bubble

The bitcoin is beneficial for small businesses

Brian Kelly sees that the

“Bitcoin is attracting more venture capital at a faster pace than the internet did in its infancy.”

This leaves room to assume that the use of the digital currency by small businesses is beneficial. A small business that uses BitPay saves a lot of money in foreign exchange costs as well as a lot of time that would otherwise be spent to fill out wire transfer paperwork to send the money abroad. This explains why more than 50,000 retailers have adopted the bitcoin at a fast pace.

Risks involved, yet mitigated

Currency fluctuation is the main risk that a business using the bitcoin has to deal with. However, given that online bitcoin platforms convert the digital currency to fiat money on the spot, the risk is mitigated. For any business owner keen to capitalize on the cryptocurrency technology, there is a main rule to remember: as with every new technology, there are potential setbacks. Yet, there is little doubt that the bitcoin is a game changer in the financial services environment given its revolutionary technology and cross-border lending option.

Image Credit: http://www.briankellycapital.com/bitcoin-big-bang

Digital currencies such as Bitcoin are enabling individual criminals, who come together on an ad-hoc basis, to boost the “crime-as-a-service” business model. The newly-released Europol report titled, ‘Exploring Tomorrow’s Organised Crime’, states:

Virtual currencies increasingly enable individuals to act as freelance criminal entrepreneurs operating on a crime-as-a-service business model without the need for a sophisticated criminal infrastructure to receive and launder money.

The research, aimed at identifying the key trends in the EU criminal landscape, revealed that such developments which have until recently remained limited to the cyber crime space will extend to traditional organized crime such as drugs trafficking, illegal immigration and counterfeiting of products.

However, the research should come as no major surprise given the claims that the barbaric terrorist organization ISIS is using Bitcoin for money laundering and recruitment purposes. The Jihadi group has been repeatedly pushing its supporters to use Bitcoin for fundraising activities as the process is anonymous and tracking is impossible. This makes it even more complicated for the law enforcement authorities to restrict the transactions.

Europol’s EC3 cyber crime center had earlier described in length how Bitcoin was being used to pay for live-streams of child sex.

Bitcoin, Bitcoin news, cryptocurrency news, Europol report

This report also brings forth one important consideration: As the Bitcoin community continues to expand and more businesses accept it as a payment method, it will become impossible to even gauge the extent of the digital money circulating in the criminal landscape. The only possible solution to this mess is the regulation of the cryptocurrency by national regulatory bodies. In the absence of any regulatory framework, the freelance criminal entrepreneurs will continue unabated with their anti-national motives and their activities may see an unprecedented rise over the years.

Europol experts worked in close cooperation with experts from the private and public sectors, academia, and the European law enforcement authorities to construct this report.

Image: www.btcbible.com

Tera Group Inc, the operator of the US’s first regulated Bitcoin derivative platform Tera Exchange, recently signed a merger agreement with MGT Capital Investment; thereby adding a crucial step that should make the former a publicly listed company.

TeraExchange Logo

According to the available details, both the parties have currently agreed on some “contemplated” terms of the agreement which will reach its conclusion by March 16th, 2015. But as per now, it is definite that Tera will have a major stake in MGT’s common stock shares (at least 70%).

From the look of it, Tera however seems to be disinterested towards interfering in its new partner’s chief operations, related to managing online gaming websites. Instead, the plan here is to meet future demands for regulated capital market solutions, which is expected to go as high as Bitcoin’s consumer and merchant adoption.

“By combining with MGT, Tera will create a unique public offering to support the essential infrastructure needed for a vibrant global bitcoin ecosystem,” said Christian D. Martin, Chairman, Chief Executive Officer and Co-Founder of Tera.

MGT’s Chairman H. Robert Holmes also kept his hopes high from their merge deal, saying that it gives “immediate and future value to their stockholders”. He further supported the idea of Tera to create the US’s first publicly listed Bitcoin derivative platform, citing the enormous investment the industry has received in past 12 months.

“We see our move today as further progress in the broader adoption of the industry,” Holmes concluded.

Once the plan comes into action, the Tera’s ever-expanding swap services will hopefully mend one of the most disturbing ills of Bitcoin market — the price volatility. Traders will be allowed to counteract risks by simply making profits from Bitcoin’s ups and downs in the USD markets. This will also help Bitcoin achieve better adoption and infrastructure in the future.

The meteoric rise in the popularity of Bitcoin can be attributed to it being the safest and the most reliable payment method. With the cryptocurrency getting the acceptance of coveted brands like Microsoft and Dell, in addition to the numerous small and medium-sized businesses, consumers have also shed their inhibitions as they dump the greenback for the unregulated digital currency.

bitcoin Safety first cartoon

But the massive growth of the Bitcoin industry in 2014 was marred by a spate of Bitcoin exchange scams which have severely dented the investors’ confidence. The Hong Kong Bitcoin exchange MyCoin recently disappeared with roughly $8 million of consumers’ investments, dealing a hefty blow to the Bitcoin community which is already struggling to get the support of national governments.

There are certain measures, which if implemented, can bring invaluable stability in the highly volatile Bitcoin prices as well.

  • Know Your Exchange – Investors must be diligent to do a thorough background check on at least the senior members of the exchange and keep a close eye on the exchange’s activities. For example, the abrupt resignation of MyCoin’s sole director, William Dennis, should have raised eyebrows and active intervention of the investors may have averted the scam. The director, interestingly, resigned one month before the scam.
  • Look For Credibility – Just like brands such as Microsoft incite confidence in the digital currency, investors should look for credible names and reputed organizations supporting exchanges. For instance, the US-based Bitcoin exchange Coinbase has received investment from the highly revered New York Stock Exchange. This in itself is a major positive for the Bitcoin markets and investors do not have to lose their sleep worrying about losing their hard-earned money to a scam.
  • Responsibility Of The Exchange – Exchanges must ensure transparency in their way of functioning and provide the clients with substantial security and not just online accounts. Monthly updates to the clients regarding policy changes, with high emphasis on withdrawals, can significantly bolster the flagging confidence.

These are simple, yet highly effective measures which can be implemented if the digital currency was to be rid of the “ponzi” tag.

Photo by: www.washingtonpost.com

The constantly growing Bitcoin technology could replace cash in Australia within a decade, believes Professor Rabee Tourky, the Director of Research School of Economics at Australian National University.

Bitcoin technology replace cash in ten years ANU economics

As per his prediction, the Australian government could one day start minting its own digital currency in this ever-growing digital world. “In 10 years’ time there won’t be any paper cash,” the  economist said. “The big question is what’s going to replace it in Australia? Will it be Bitcoin? I don’t think so. More likely it will be ‘AusBit’, an Australian government issued digital cash.”

This would simply mean that the dear cash will have to go at some point, if one already considers its declining use in recent times and tries drawing a futuristic picture out of it. Professor Tourky himself recognized digital cash payments as one of the most emerging, and great experiment of the economy, and therefore decided to include it into their first-year Money and Banking unit.

“ANU economics students typically go into leadership roles, either in government or in the banking sector. In four or five years’ time they are going to be faced with these issues,” he added.

Bitcoin Not an Ideal Prototype

Any new form of payment method attains adoption based on two factors — low costs and secure infrastructure. Australian government will have to administer them both in order to work our a balanced scenario. Bitcoin has indeed proved itself as a cost-cutter; but in terms of infrastructure, its technology still has to go a long way.

Such issues have been well noted by Professor Tourky, who thinks cryptocurrencies are a way too anonymous and private to regulators who wish to monitor their flow. “These are going to be big open questions in economics,” he said. “It’s going to become a major issue for people studying money and banking.”

In the end, we believe that a government will never be launching a centralized cryptocurrency based on Bitcoin’s prototype. There would be a thorough study on how “AusBIt” could be traced when being used for benefiting criminals. Handling this sort of infrastructure might be arduous in terms of cost, but we hope there will be a way by the time we reach 2025, as Professor Tourky predicted.

The Bitcoin ecosystem continues to expand with even more customers and businesses accepting the digital currency as a cheap, reliable, extremely fast, and no frills payment system. The cryptocurrency has recently also caught the attention of several central banks who view it as a potential tool to reform the obsolete financial system. The Bank of England in its One Bank research initiative has equated the alternative payment system to the Internet revolution of 1989. The European Central Bank echoes the views of the Bank of England and has called the digital currency space “potentially transformative” if the stability issues can be sorted out.

So, what’s holding back the Bitcoin price?

Even as the world’s leading central banks investigate the technology behind Bitcoin’s success as a peer-to-peer network, there are compelling factors working against the price rise.

  • Lack of regulation

In the wake of timely scams hitting the bitcoin market, such as the MyCoin scam, where the bitcoin exchange duped investors of $8.12 million.  Investor as well as consumer confidence took a severe hit. The Ponzi tag continues to stick and investors look at every rise as an opportunity to dump their investments.

bitcoins worth 500 dollars

  • Are the central banks really supportive?

As much as the individuals and the Bitcoin community would appreciate strong, unquestionable backing of the central banks, there are genuine doubts over their support. The concept of Bitcoin completely undermines the working of the central banks, which have been resorting to currency devaluations in order to continue with lower interest rates. While the banks resort to unprecedented money printing, there is only a fixed number of Bitcoins that can ever be mined, i.e. 21 million. And it seems highly immature to expect honest cooperation from them when they are waging an undeclared currency war.

  • Bears continue to have the upper hand

A simple look at the weekly price chart below clearly reveals that bears have a strong hold on the price. The first sign of the breakout from the long-term downtrend would be a weekly close above $300. Sustaining above this may lead to immense short-covering and a slingshot recovery in the price up to $600. However, a failure to break free from the grip could lead the price to $100.

Bitcoin Chart

Image: https://www.tradingview.com/x/EqyjmTcZ/

Conclusively, it can be said that Bitcoin markets need strong structural changes and sincere, reformist measures from the government to rid the currency of the “ponzi” tag and restore investor confidence. If that happens, the ride to $500 should be a cakewalk!

United States Patent and Trademark Office (PTO) recently rejected a patent application (Reg 86135516) for the trademark ‘Bitcoin’ filed by Urban Trend LLC, a Californian household product company.

Bitcoin trademark

The motion came to rest as a part of default judgment, when Urban Trend failed to submit an answer to the patent’s opposer Russ Smith, the owner of Atlantic City Bitcoin, LLC and HELP.ORG LLC. In his application, the opposer had described himself as the registered owner of the trademark ‘MILLY BITCOIN’ (Reg 4435599) and had accused Urban Trend of committing a fraud during the application for registration.

“Defendant [Urban Trend LLC] replied to an office action requesting the significance of BITCOIN to the application,” the motion read. “Defendant replied that BITCOIN had no significance. Defendant failed to describe that “BITCOIN” merely describes a characteristic of applicant’s goods. Namely “BITCOIN” referred to the fact that the items would be labeled as logos referring to the Bitcoin currency.”

Russ Smith’s motion further pointed the similarities between his and defendant’s business profiles that will end up creating confusion among customers.

Upon the successful notice of opposition, the PTO office sent directives to both Smith and Urban Trends, attached with a time schedule that asked the latter to submit its response by January 26th, 2015. The defendant however failed to answer any of the accusations mentioned in the lawsuit, despite being aware about it. Smith thereby entered a legal position to request for default judgment, a step that took the case to his desired conclusion.

The trademarking of Bitcoin and related products is not a new thing in the industry. The Bitcoin Foundation has previously reported that there are at least 35 marks alone in the US that contains the word Bitcoin in it. At the same time, the non-official Bitcoin advocacy group also opposed the idea of trademarking the digital currency.

“It is a generic term like the terms used for other currencies such as “dollar”, “euro,” “yen,” etc,” it had stated. “The Foundation is committed to doing what it can to protect the term “BITCOIN” for public use.”

The Bank of England, in its latest “One Bank” research, has pointed towards digital currency as a “potential channel” to address the financial and economic instabilities that cripple the global financial system today.

The central bank noted that,

Digital currencies, potentially combined with mobile technology, may reshape the mechanisms for making secure payments, allowing transactions to be made directly between participants.

While raising the systemic issue of launching its own digital currency, the Bank also linked the Bitcoin revolution to the Internet revolution that continues to transform our lives even today. It ascertained that,

creating such a system would entail creating a protocol for value transfer over the internet, akin to what Berners-Lee (1989) did for information.

Acknowledging that introduction of the peer-to-peer network may reform the way individuals use their traditional banks and insurers, the Bank did not hesitate to rule out the consequential negative impacts on the traditional banking network, and the existing payment systems.

The digital currency landscape has been gaining strong traction from governments around the world as they up the ante to fight the sticky deflation. The Ecuadorian government has already introduced its own digital currency, and the newly elected Greek finance minister Yanis Varoufakis recently voiced his opinion that the technology behind Bitcoin could be effectively used to fight deflation in the Eurozone.

The European Central Bank, in conjunction with the Bank of England, has also described the digital currency as potentially transformative in the payments arena.

Successful and widespread acceptance can also boost Bitcoin mining which has seen a decline post the 80% drop in the price. With mining expected to get more complicated, and with a limited number to meet the renewed demand, the economics may well play out in favor of central banks who are struggling to prop up inflation levels.

Bitcoin markets cheered the positive outlook as the value of Bitcoin shot up above the $275-mark.

Bitcoin price continued rising as the market’s buying volume is increasing constantly. A high of around $280 was printed earlier today and if the current bullish momentum continues and bitcoin price exceeds $284, it will face no considerable resistance on its way up to $320.

By studying the 4 hour Bitfinex (BTC/USD) charts from tradingview.com, keeping the same Fibonacci retracement fan we created during yesterday’s analysis and plotting the William’s Alligator indicator accordingly (look at the below chart), we can notice the following:

  • Bitcoin price is continuing to record higher highs as it broke through the 38% Fibonacci retracement fan level and is now heading to $284 which corresponds to the 62% Fibonacci retracement level.
  • If bitcoin price rises above $284 within the next few hours, it will inevitably reach the $320 level as there is no significant resistance between the 50% and the 62% Fibonacci retracement levels as proven by the price transformation on 25-26 January.
  • The moving averages of the William’s Alligator indicator are still exhibiting a “bullish alignment” as the 21 SMA (lips) is below the 13 SMA (teeth) and the 8 SMA (jaw) is above both. Given the high sensitivity of the William’s Alligator indicator in detection of bullish waves, we expect the current bullish waves to continue pushing the price past $300 within the next 48 hours.

bitcoin price, bitcoin analysis

By studying the 1 day Bitfinex (BTC/USD) charts from tradingview.com, charting the Bollinger Bands and plotting the RSI and MACD indicator (look at the below chart), we can notice that the price has now risen above the upper band which might mean that the market is overbought. This predicts slowing down of the bullish wave, especially because the RSI value is close to 70. Accordingly, care must be taken to detect other signs that can signal slowing or even reversal of the bullish trend.

bitcoin price, bitcoin analysis

 

Conclusion:

Although there are signs signaling slowing down of the bullish trend, the buying power of the market can still push the price to higher levels. If the $284 resistance is broken, the $320 target level will be almost imminent within the next 48 hours.

 

Charts from Bitfinex