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The digital currency robbed gold of sheen
Virendra Singh Rawat
Economic journalist
“Change is the only constant,” goes an old adage; and this principle applies equally to all aspects of our modern lives, economy being no exception.
The ever changing economic landscape continues to acquire newer forms each day with the effect that developments that today appear near improbable could evolve into unimaginable statuses. The growing digitisation in all the spheres is another cog in the wheel.
In this context, world’s most famous cryptocurrency ‘bitcoin’ probably falls in the same category.
The rise of globalisation and the current spate of global economic paradigms, wherein there have been serious debate if globalisation has in fact caused greater economic divide between nations and between different strata of societies within individual nations, provide a perfect breeding ground for the concept of cryptocurrency to gain greater ‘currency’ in the times to come.
This past Friday, bitcoin beat gold in per unit valuation at the exchange in New York for the first time. The yellow metal had been on the declining trend over the week though. Yet, bitcoin trumping gold at the exchange is no mean development, which instead is a testimony of the cryptocurrency being accepted as a matching asset class and being lapped up by the discerning investors.
For the uninitiated, cryptocurrency is merely a digital form of currency, which could be used just like any other normal currency for settling payments between two market places, which voluntarily subscribe to it and transact through a virtual wallet.
In this process, the cryptocurrency bypasses the established financial and banking channels to settle payments between two interested parties.
One could procure bitcoin online and trade over the designated exchanges. However, there have been instances when such currency forms are used by unscrupulous elements, since it bypasses established and regulated financial and banking channels. At the same time, there are no standard parameters to fix the value of bitcoin, which in effect renders it vulnerable to volatility and arbitrariness.
The sudden surge in the value of bitcoin has been, by experts, attributed to tightening monetary controls in some developing economies viz. China, India and Venezuela, apart from the uncertainty around the new Donald Trump administration in the US with regards to his present and future economic, employment and security related policies.
Nonetheless, several countries have taken measures to regulate the trading in bitcoin to insulate their formal economy and restrict the entry of criminals and crooked elements in its sphere to dupe gullible investors.
Thus far, the US dollar has been regarded as the safest currency and asset class for investment and hedging the world over. However, with the global economic order readjusting to the emergent socioeconomics in the wake of Brexit, slowdown in global economy, rising economic might of China, protectionism streak in the US and European countries, there could possibly be the need for another form of currency independent of a nation’s official currency for trading and trade settlements.
In near future, bitcoin could acquire the same status as gold for standard valuation and settlement of international trade transactions with the active participation of all the major world economies. Bit by bit, bitcoin could possibly become the acceptable virtual coin in the digital world.
