After struggling against a barrage of criticism and tightening regulation, Bitcoin, a cryptocurrency that rose to prominence last year after appreciating phenomenally against other currencies, seems to be gradually gaining broader acceptance. A major development in this regard came this week: Peter Schiff, widely known as a vocal bitcoin critic, has announced that his broker-dealer, Euro Pacific Capital Inc., will take bitcoins for gold.
Schiff – who is Euro Pacific Capital Inc.’s CEO and chief global strategist – has partnered with BitPay, the foremost bitcoin payment processor, to give investors the option to purchase precious metals with a cryptocurrency. BitPay will convert all payments made in digital currencies and pay Euro Pacific in US dollars. Euro Pacific itself will not be taking any positions in bitcoins.
Euro Pacific’s Director of Marketing, Michael Finger, said: “Bitcoin facilitates the process, but we're not speculating on bitcoin in any way. It’s a means of payment that allows us to complete the equivalent of credit card transactions, but with a much more efficient process and with a much lower fee.”
Schiff, who once compared bitcoin to a “modern day tulip mania,” has not wavered from that view. He still believes that the digital currency will never become a global medium for commercial exchanges, but has offered a practical explanation for his willingness to accept it as a payment option: since many investors have holdings in bitcoins, accepting the cryptocurrency will make it easier for them to purchase precious metals.
Initially, bitcoin was just an algorithm 'mined' by tech geeks. But as it appreciated exponentially against other currencies, investors and traders jumped on the bandwagon looking for overnight gains. At its peak, one bitcoin was worth more than $1,100. Currently, bitcoins are worth a little above $500 and have a market capitalization of around $6.6 billion.
Bitcoin has faced a barrage of criticism from governments, regulators and investors over the last year. Late in 2013, the Chinese central bank had barred financial institutions from making bitcoin-related transactions. Then came what was perhaps the biggest blow to the young cryptocurrency: the shutdown of Mt. Gox, once the large bitcoin exchange in the world, after it reported that 12.4 million bitcoins from its accounts had been stolen.
Despite the repeated hammering, however, bitcoins have survived. The bitcoin ecosystem has also evolved with the addition of more exchanges, payment processors and vendors that accept the cryptocurrency. Once a very volatile investment, it has slowly acquired semblances of stablity.
It now seems that bitcoins may just be here to stay – although no longer as an investment that will give exponential returns on principal. But that is a blessing in disguise, as it means there will be more stability in the cryptocurrency market and less volatility. Even burdened with regulation, it seems that the cryptocurrency market will evolve and mature. Vendors and payment processors will be able to thrive now that the value of bitcoins will not swing wildly overnight. Very soon, you may just find major retailers who accept bitcoins, and customers who pay for their purchases through QR codes.
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