Convergex’s Nicholas Colas and Holland & Company’s Michael Holland discuss the Bitcoin Bubble on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)
SMALL tribes have often used unique forms of money. Until recently, west Africa’s Ashanti had perhaps the oddest. Eschewing the convenience of metal discs, stones or shells, they used metal painstakingly moulded into the shape of small chairs, representing the tribal chief’s throne. But the latest cult currency—Bitcoin—is stranger still. Invented in 2009, this computerised money exists only as strings of digital code.
IN 1999 an 18-year-old called Shawn Fanning changed the music industry for ever. He developed a service, Napster, that allowed individuals to swap music files with one another, instead of buying pricey compact discs from record labels. Lawsuits followed and in July 2001 Napster was shut down. But the idea lives on, in the form of BitTorrent and other peer-to-peer filesharers; the Napster brand is still used by a legal music-downloading service.
The value of the virtual currency Bitcoin has hit an all-time high. The financial crisis in Cyprus has driven many people to seek out alternative homes for their money. Some investors in the Mediterrranean island nation stand to lose up to 80 percent of their savings, as part of strict conditions attached to a $13bn bailout. And there are fears other countries could suffer the same fate, this situation shaking consumer confidence in traditional banks, and adding to a surge in trading in these so-called Bitcoins.