March 31, 2013
Already bigger than many sovereign currencies,
Bitcoin has broken the $1 billion in value mark this week.
In the wake of
continuing economic crises and liquidity shortages, this new virtual
currency is poised to challenge the Euro and US dollar.
By not being tied to any particular financial institution and independent
from world governments, Bitcoin will become a safe haven for anyone trying
to save their money from the crippled international banking system, claimed
Max Keiser, the host of RT's Keiser Report.
“It is inevitable that Bitcoin will become a
multi-trillion dollar enterprise because every other currency in the
world is tied to dying central banks that are encumbered with
impossible-to-pay debts and bankrupt counter-party risks,” Keiser said.
Bitcoin emerged in 2009 amid the global financial meltdown.
The digital currency was created by someone who
identified himself as Satoshi Nakamoto. It is based on open-source
software, and uses peer-to-peer connections for monetary transactions to
avoid centralized authorities.
Bitcoin aims to provide safe and secure exchange by verifying transactions
with encryption that is used in military and government applications. And
unlike bank services, the Bitcoin network is free, except for a voluntary to
speed up transaction processing.
Bitcoins can be bought
for other currencies, virtual or real, and are accepted as
payment for goods or services. They can also be won through
gambling, received as gifts or donations, or simply 'mining'
- the process by which new Bitcoins are introduced into the
Bitcoins (BTC) are bought and sold for other currencies at
online exchanges. The Japan-based
Mt. Gox is the largest of
its kind, where BTC have recently traded at an average
exchange rate of $90 per Bitcoin.
Issuance of the currency is completely automated, with 25 new bitcoins
generated every 10 minutes; inflation is set to be halved every four years,
until a total of 21 million Bitcoins is reached.
In theory, the currency would not lose its
purchasing power unless individuals and businesses refused to use bitcoins.
With numerous financial companies already exchanging bitcoins into any of
the world’s currencies, the founder of the Swedish Pirate Party,
Rick Falkvinge, estimated that Bitcoin could capture between 1 and 10
percent of the global foreign exchange market.
This implies that the price of each and every
Bitcoin would rise to between $100,000 and $1 million, Max Keiser explained.
“I have stated that myself,” Keiser said. “I
think bitcoin's price will reach $200,000 per bitcoin before Warren
Buffett's Berkshire Hathaway's stock.”
Ten years ago, few predicted that Facebook would
have more than 1 billion users worldwide.
By the same token, few today imagine Bitcoin
could take on the G20 nations, but Keiser believes this may soon take place:
“Bitcoin's valuation, already bigger than
many sovereign currencies, will challenge the most-traded currencies
today, including the US dollar, the Euro, the yen and the Renminbi.”
Regulatory hand reaches out
Because the virtual currency bypasses authorities and cannot be taxed unless
the person deliberately reveals his transactions, the US government and the
Treasury Department are seeking to enact stricter regulations and new
Bitcoins are vulnerable
to being stolen by hackers, thieves and fraudsters, though
the Bitcoin community has made efforts to curb such crimes.
The largest Bitcoin scam reportedly ran in 2012, and was
structured like a classic Ponzi scheme. Investors lost at
least 200,000 BTC worth $2.2 million at the time, according
to the Bitcoin Forums. The high estimate puts the number at
500,000 BTC, or 5 percent of the total number of bitcoins in
circulation at the time.
The largest Bitcoin hacking
heist, in March 2012, robbed the victims of 46,653 BTC
($230,468). The perpetrators exploited a vulnerability in
the customer service of Bitcoinica exchange to get access to
Satoshi Nakamoto, who created Bitcoin in 2009, left the
system to develop on its own in 2011; his true identity was
One popular theory among Russian bloggers speculates that
Nakamoto is Grigory Perelman, a reclusive Russian
mathematician famous for solving the Poincaré conjecture and
receiving the Fields Medal - the 'Nobel prize of math,' -
for the achievement.
It is difficult to predict this new policy would play out:
Patrick Murck, a legal counsel for
the Bitcoin Foundation, a trade group promoting industry standards, said
“would be infeasible for many, if not
most, members of the Bitcoin community to comply with.”
Keiser believes that Bitcoin users and the
currency itself have little to worry about, unlike most of Internet startups
feeling themselves suddenly vulnerable to government oversight.
Bitcoins are not issued by a central body, and
rely on a network of verification nodes to regulate transactions; in the
future, Bitcoin users may achieve enough political clout to defend itself in
“As Bitcoin's price increases, the new
Bitcoin millionaires and billionaires will use their economic clout to
rewrite laws in favor of Bitcoin, the same way banks like JP Morgan or
Goldman Sachs lobby government to write laws that favor them,” he
Bitcoin could also offer relief to debt-stricken countries such as Cyprus.
“Cyprus was Bitcoin's 'come to Jesus' moment
and it's fitting it happened around the Easter Holiday,” Keiser said.
“For millions of people around the world who
have been victimized by banksters and their corrupt politician friends,
the light bulb went off and they suddenly realized they could save their
wealth by parking it in Bitcoin and no government or bankster could stop
After the initial rush of interest in the
Internet in the mid-1990s, and the follow-up boom of Web 2.0 and the growth
of social networking, Bitcoin is the third and,
“perhaps the most disruptive wave of all,”
“This is Web 3.0,” he said.
“For me it's extremely exciting since I
pioneered the idea of virtual currencies back in the mid 1990s and have
four US patents in my name covering virtual trading and virtual
currencies. Most people I talked to back then about these ideas and the
possibility that something like Bitcoin could exist didn't think it was
possible. They were wrong.”