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The wild, leaping bitcoin. Ever tried to spend one?

December 6, 2017 Headline News No Comments Email Email

Most people have never seen a bitcoin, let alone tried to spend one – and maybe that’s just as well.

The cryptocurrency is notoriously volatile, with its value leaping in fits and starts. But it’s apparently a far harder currency to spend than many people realise.

The price of a single bitcoin was listed on xe.com at 6.30pm yesterday as AUD 15,159.74. That’s almost double the price early last month, when bitcoin values plunged to about AUD 8000, after almost hitting AUD 10,000 in October. The currency has risen over 1850% since 2015 – at last glance.

Bitcoins

According to research by Alicia (Lucy) Cameron and Kelly Trinh, respectively a senior research consultant and a data scientist with the CSIRO, four factors affect the price of Bitcoin: media hype and uptake by peers; political uncertainty and risk (such as the election of Donald Trump or the vote for Brexit); moves by governments and regulators; and the governance of Bitcoin itself.

A recent investigation, however, indicates bitcoin isn’t nearly as readily accepted as some people think. Obviously you can’t hop in a cab and expect change for something like that – but apparently it’s hard to spend online as well. Neither Expedia.com nor Virgin Atlantic accept bitcom for airfares these days, though they both dabbled in it, an investigation by Bloomberg’s Gadfly column has revealed.

The Gadfly probe found that many places which said initially they accepted bitcoin have quietly dropped the idea.

A website called pizzaforcoins.com says it accepts over 50 cryptocurrencies, including the best known one, bitcoin (financial code XBT). But when Bloomberg investigated, it found a large Domino’s pizza with one topping in New York cost 0.0036 bitcoin “which translated to USD 34.12 before tip. It normally costs USD 8.70”.

The price of that pizza (0.0036 bitcoin) is now USD 42.12 – a problem with a currency that bounds in value like a yo-yo.

Bitcoin at 7.30am this morning on xe.com. Up again!

The Bloomberg columnist concluded that the cryptocurrency’s remarkable recent rise was due largely to the fact that the price has been climbing rapidly, “like in any bubble”.

The rise justifies the rise.

A key aspect of bitcoin, which is based on blockchain technology, is that it’s a cheap way to complete transactions without the middleman.

As for the belief that bitcoin is being rapidly adopted, Bloomberg Gadfly concluded that’s a myth. Shoppers still can’t use it at any large physical retailer and long lists of places that accept bitcoin are largely bogus.

The shifting price of bitcoin remains a mystery. The two CSIRO scientists note that economists have long held a notion “that psychological factors affect investor decisions. This is called ‘animal spirits’ and refers to investors making decisions based on the behaviour of other market participants and their own intuitions, rather than hard analysis.

“Analysis of the price of Bitcoin shows that positive media coverage is one of the main factors driving the price.

“Positive media coverage of new technologies causes a well-known hype-cycle – a peak of hype is followed by a ‘trough of disillusionment’.”

To read the CSIRO duo’s findings, see The Conversation here.

Their conclusion: “Our only tip would be – don’t put in more than you can afford to lose.”

Written by Peter Needham

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