The looming clouds of uncertainty are hanging over the markets, as the saga of events leading to 2016 presidential elections is still unfolding. The markets showed a 2% surge on November 7, after FBI once again cleared Hillary Clinton regarding her private servers’ emails. Nevertheless, market analysts argue that the shock from a plausible Trump’s victory will likely hit the markets even harder than the Brexit (which cost investors about 2$ trillion in one day).
Photo by Jonathan Waller (Whitez) [https://creativecommons.org/licenses/by/2.0/]
In this volatile environment, investors are looking for safer investments and some of them are opting for the virtual currencies such as bitcoin. Bitcoin is the most popular virtual currency in the market with more than 100,000 transactions per month. Bitcoin does not have a physical existence and is not controlled by a central authority the way Canadian dollar is controlled by Bank of Canada. Its backbone is essentially computer code, distributed among a wide network of servers called ‘nodes’. Transactions made by bitcoins are anonymous and a record of all the transactions to date is called a ‘blockchain’. Blockchains can be best understood as ledger account, which is openly available online. Creation of bitcoin takes place when a node performs a large amount of calculations to add a block to the blockchain; this process is commonly referred to as ‘mining’.
Diagram describing number of bitcoin transactions per month
Virtual Currencies such as bitcoin, always had their place in the tech community, but what makes bitcoin attractive to financial industry? For the majority of its lifetime, bitcoin has been on the shadier side of the economy; the tax authorities and the law enforcement did not exactly know how to treat it under the law and remained suspicious of its potential for illegal transactions. But in recent years, many have caught up including Canadians, who passed their first law in June 2014 for regulating the use of bitcoins.
Bitcoin is Fair, Stable, Safe, and Secure *
In contrast to paper currency, bitcoin transactions are always recorded, making it easy to keep track of the currency on the market. Also distribution of blockchains among nodes globally, makes the transactions’ records secure and almost impossible to alter. These two qualities convinced the Swedish National Land Survey to consider bitcoins as a tool for transaction and record keeping, as it is many times faster than the current manual methods requiring lots of paper work. Convenience afforded by the bitcoin is an important factor in attracting people; there are currently more than 100,000 merchants that accept bitcoins with hundreds of ATM machines around the world. Bitcoins cut the middleman in the transaction, meaning that buyer and seller interact directly instead of through credit card companies and this eliminates the transaction fee. Like non-virtual currencies, bitcoin’s value fluctuates over time. However, as the political volatility increases, bitcoin locks steps with gold, making it an attractive investment hedge in the times of uncertainty. For all of these reasons, investors are considering bitcoin as a viable investment option; putting its star on a rising path.
* https://www.bitcoinmining.com/
Sadaf Yadegari
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