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What Happened to Bitcoin?

Sigma Investment Counselors

May 17, 2017

According to Wikipedia, bitcoin is both a cryptocurrency and an electronic payment system invented by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto.  Bitcoin was introduced in October 2008 to a cryptography mailing list, and released as open-sourced software in 2009.  The system is peer-to-peer, allowing users to transact with each other directly, bypassing governments and banks that act as middlemen in financial transactions.

This sounds complicated and may not be an ideal method for conducting everyday transactions.  Never-the-less, bitcoin has attracted a core group of dedicated participants who believe in its future.  While some vendors accept payment in bitcoins, it appears that this remains contingent on the vendor being able to almost instantly convert received bitcoins into a traditional currency, such as U.S. dollars.

Bitcoins are actively traded and are prone to wide and rapid fluctuations.  Bitcoins trade in dollars, or other currencies, suggesting that there is no business or consumer need to enter into bitcoin based transactions.

At present, most bitcoin activity appears to be limited to traders (speculators) and people who want to move money without being detected.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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