Is bitcoin the way to avert Greek's debt crisis?
Well, if you simply look at the price of bitcoin – which has been rising in lockstep with the intensity of the crisis – you might be tempted to say yes.
Since late last week, bitcoin prices have begun to surge. However, most speculate that it's more than a coincidence that is happening at the same time the Greek debt talks took a plunge.
"[Bitcoin] had been middling around the $235-$245 range for several months, and all of the sudden this crisis escalates and you've gotten yourself a nice 10-point pop," Brendan O'Connor, CEO of digital currency-specialists Genesis Global Trading, told CNBC. "I don't think it could be for any reason."
Around midday Thursday (July 2), bitcoin's price was just above $254.
But across Europe the bitcoin volumes are surging, other reports say.
“Volumes in the last 48 hours have been about 300 percent higher than they have been,” Fred Ehrsam, co-founder of Coinbase, told Fox Business, adding that this means consumers are “becoming aware of what it really means to have money in their bank account."
Bitreserve's new CEO, Anthony Watson, also said his company has seen an uptick in bitcoin activity as it relates to the euro. Interestingly enough, there's been more consumers looking at fiat currencies and gold investments via Bitreserve, Watson said. He also pointed to the fact that there's not a general awareness of what exactly bitcoin is in Greece.
"Laypeople in Greece don’t know what bitcoin is. They are still struggling with the concept of what a cryptocurrency is,” noted Watson, who also admitted that during a time of crisis, people might be less likely to trust a currency that has immense volatility — saying that bitcoin "bounces around like a jack rabbit."
The Greeks, at least the general population, may not be familiar with the digital currency, but its financial crisis has certainly started conversations about the role of bitcoin and the blockchain on a global scale.
"To see the future of finance, we must look beyond the currency use case for bitcoin and blockchain technology. It is encouraging to see that this relatively small crisis has not only highlighted one of bitcoin's use cases and has caused the price to rise. Imagine what bitcoin would be worth when all the use cases are realized," wrote Brian Kelly, founder and managing member of Brian Kelly Capital LLC, a global macro investment firm, earlier this week.
"Using blockchain technology (the technology behind bitcoin) there is a simple and elegant way for Greece to monetize assets and pay government employees," Kelly wrote in an op-ed piece for CNBC in May.
Two months later he’s sticking by his story — as the discussion about how the blockchain could play a role in Greek's financial crisis continues.
"The Holy Grail of safe-haven assets would be a digital currency that is backed by gold, but this does not exist … yet," he continued. "The bottom line is that when it comes to safe-haven assets, gold is for currency crises and bitcoin is for political crises."
Kelly said he checked with his bitcoin-exchange contacts, all of whom told him they haven't seen an increase in consumers buying bitcoin as a result of the crisis, but that doesn't mean the talk about Greece and the bitcoin solution hasn't played a role in driving up its price.
Ironically enough, bitcoin — volatility and all — has been viewed by some bitcoin enthusiasts as a safe-haven during times when physical currency might be difficult to get their hands on. As Kelly points out, there's been plenty of speculation that people in Greece would rush to buy bitcoin, but in reality, there's one problem: How can people who can't access their bank accounts buy bitcoin?
“The fact that their ATMs have no cash tells you a lot about how digital currency could be important,” said James Robinson IV, managing partner at RRE ventures, told Fox Business.
The Bitcoin Disconnect In Greece
But again, other researchers say they can't imagine it's the Greeks themselves driving up that price. More likely, it's the tech-savvy Europeans who were already into bitcoin seeing a time to capitalize on the digital currency's potential. Eli Dourado, a research fellow at the Mercatus Center at George Mason University, told Fortune there's no evidence that Greece's cash-centric population, which is more worried about getting their cash out of the bank, is rushing to buy bitcoin.
“Greeks probably should have been buying bitcoin six months ago,” Dourado said.
He also asserted that bitcoin's "surge" isn't so much of a surge after all. In fact, he said, bitcoin hasn't seen much volatility in the past sixth months.
“I think we are seeing a boomlet in global demand as a hedge against any kind of uncertainty, not just [the uncertainty] in Greece,” Dourado said in the Fortune interview. “I think the value of the concept is being affirmed. I would also note that it doesn’t take a huge increase in interest to move the bitcoin price, so I would be careful about overselling the increase in price over the last couple weeks—it’s still a pretty modest increase.”
While it's not likely the Greeks rushing to pick up bitcoins, other blockchain experts says there is potential behind the blockchain for Greece — but the digital currency has a long way to go before it's going to gain acceptance in the country.
“It’s money the government can’t touch. If I were a Greek citizen right now, I’d be scared out of my mind," he also told Fortune. "The fact that you can put your money in bitcoin and wait out what happens is very useful. Given the choice of a Greek bank, or bitcoin, I’d take bitcoin all day long.”
Still, for now, he said, most Greek citizens are probably asking: "what's a bitcoin?"
They aren't alone.
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