Cryptocurrency and blockchain technology are here to stay.
Authored by Joel Comm via Inc.
Listen to a bitcoin enthusiast and you might get the impression that cryptocurrency is a beacon of liberty. Governments can’t touch it. The authorities can’t track it. The stock exchange can’t influence it. It’s a coin that’s unique and untouchable. It’s not quite that simple. In fact, the price and the future of bitcoin are affected by all sorts of influences beyond the control of the crypto community.
Bitcoin Is Affected By Government
Bitcoin might not have a bank chairman who sets interest rates but that doesn’t mean that decisions made by men in suits don’t affect its price. In July this year, the SEC investigated an ICO launched to fund a cryptocurrency venture capital fund called DAO. The DAO was hacked and $50 million worth of coins were stolen. In its investigation, the SEC’s asked whether a cryptocurrency was a security and needed to regulated as one. The answer then was a vague “maybe” but expect the government to keep looking. If the SEC changes its mind, it will affect how cryptocurrencies are launched, sold and regulated.
Bitcoin Is Affected By The Chinese Government Most Of All
Around 70 percent of bitcoin is now mined in China. A massive number of bitcoin trades now take place in China. With the government in Beijing placing strict capital controls, Chinese who want to move their money out of the country can swap their Yuan for bitcoin on one exchange then change them into foreign currency on another. That means the value of bitcoin is directly influenced by the movement of the Yuan. If China’s currency looks like it will fall, people in China buy Bitcoin and push the price up. At the start of this year, bitcoin yo-yoed from $750 to $1,150 then dropped 22 percent overnight. That was all due to goings-on in China.
Bitcoin Isn’t Completely Anonymous
The idea behind the blockchain, the technology that underpins cryptocurrencies, is that every coin is traceable. You can track the movement of a coin from the moment it’s mined as it moves from wallet to wallet. It’s the only way to be sure that no fake coins have entered circulation. While no one can see who own those wallets, the moment the coin is exchanged for a fiat currency, the identity of the owner can be known. Criminals who want to use bitcoin for money laundering really need to look elsewhere.
Bitcoin Traders Rely On Exchanges
Move money from your bank account to someone else’s and one of you will pay a fee to the bank. In theory, a democratic cryptocurrency like bitcoin should be able to do away with those institutions. You should be able to move cryptocurrency around for free and without any fee-charging middlemen. In practice, you’re going to pay a host of different fees: to miners to put your transaction in a block; to the exchange for handling the transaction; to the banks for making a withdrawal. Whether you use fiat currency or cryptocurrency, touch your money and someone will have their hand out.
But The Blockchain Is Here To Stay
If all of that sounds a bit depressing, remember that what really makes bitcoin and other cryptocurrencies special isn’t the coin itself but the technology behind it. The blockchain is now being used for everything from securing transactions between international banks to keeping track of diamonds from war zones. Bitcoin will continue to balance its free nature with the influence of institutions but the blockchain is already breaking out and taking over the world.