What goes up, must come down. That old saying seems to apply to digital currencies. After spectacular rises, bitcoin, ripple, ethereum, and the likes are coming down. For example, Ethereum just fell 14 percent after rumors that South Korea will outlaw cryptocurrency trading including bitcoins, CNN Money reports.
“There are great concerns regarding virtual money. The government has repeatedly warned about the fact that it is a very dangerous transaction but the message has not properly been delivered,” stated Park Sang-ki, Justice Minister. Park compared trading of these digital tokens to gambling and speculation. A bill is likely to be introduced soon to the South Korea Parliament to ban all trading in digital currencies.
South Korea is also investigating exchanges dealing with these cryptocurrencies. A major one, Coinbase, is being investigated under suspicion of facilitating gambling illegally. Not long ago, Coinbase halted trading in bitcoin after accusations of insider trading.
There are many critics and proponents of digital currencies. Warren Buffet claimed that there’s a huge bubble that will eventually pop. PayPal CEO criticized instability of digital currency prices and claimed they don’t behave like regular currencies. Due to volatility, PayPal will not be looking to introduce them to its system for the foreseeable future.
Risks inherent in digital currencies worry many central bankers. Many countries have
already issued warnings. Unlike paper money (also known as fiat currencies), digital currencies aren’t backed by the governments. Unlike gold, they don’t have inherent intrinsic values.
Proponents of cryptocurrencies say these are the new ways of doing business. True, the blockchain is revolutionizing finance and other areas, but you don’t need bitcoin to adopt blockchain technologies. Another claim in favor is that there will be no more than 21 million bitcoins issued.
But then, bitcoin becomes something to hold for appreciation purposes rather than something to use on a daily basis as a medium of exchange. And the fact that there will be limited quantity of bitcoins doesn’t necessary make it worthy. It could as well be 21 million of digital nothingness.