Bitcoin’s latest rise to $67,000 has befuddled billionaires and spooked central banks.
For most of its existence, the cryptocurrency has been described as a bubble that is fit to burst – but so far, each stomach-churning fall has been matched with an equally dizzying recovery.
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Although awareness of this digital asset has risen in recent years, it remains little understood.
The Financial Conduct Authority revealed in June that the number of Britons who own cryptocurrencies has surged to 2.3 million – yet at the same time, the number of people who could accurately describe what they are has fallen.
This is a huge worry to regulators. They fear consumers who may not know what they’re doing will end up losing eye-watering sums of money – and indeed, some already have.
Some countries want to ban Bitcoin altogether – India and China among them – but doing this is easier said than done.
The cryptocurrency’s decentralised nature means that the Bitcoin network is spread around the world. There’s no single person who can be pressured to shut it down, and no one computer that can take the whole thing offline.
This has created a years-long headache for regulators, not least because of how Bitcoin is often demanded after ransomware attacks.
And all of this comes before we discuss the cryptocurrency’s impact on the environment. If Bitcoin was a country, it would be the 24th-biggest consumer of energy – ahead of Poland and Egypt, and about to overtake Thailand and Vietnam. To compound the problem, less than half of the energy it uses comes from renewable sources.
At the same time, we’re starting to see how this cryptocurrency could potentially be used in daily life.
Several countries in Latin America are keeping a close eye on El Salvador, which has taken the bold step of embracing Bitcoin as legal tender. The cryptocurrency can now be used as a payment method across the country – including in Starbucks, McDonald’s and Pizza Hut. And given how migrant workers attempting to send money back home to their loved ones currently face high fees when using cash, it’s also hoped that Bitcoin could lower these costs dramatically.
Inevitably, the other question is whether Bitcoin’s price could rise further.
The British financial institution Standard Chartered has predicted that Bitcoin could hit $100,000 (£72,000) in early 2022. A Bloomberg Intelligence analyst also told me that this price is now “the path of least resistance” in the short term.
But increasing regulatory scrutiny and a precarious global economy mean that this is far from guaranteed.
