Trust, it is one of the most important things any monetary system has to have, both the financial aspects and those controlling it. As a new idea built in new technology, it has been an uphill battle for Bitcoin and the cryptocurrency industry to build that trust with a wider audience. The concept of a digital currency has been difficult for some to understand, and the technology itself similarly, however with a recent report showing that in Brazil Bitcoin trading volume exceeded that of spot Gold in the first 6 months of 2016, is this a sign that the battle for trust has been won?
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A trend has been growing for some time during the financial uncertainty we have been experiencing in various countries around the world, and that is more people looking to Bitcoin as an alternative safe haven investment. Perhaps the first sign of this was during the financial crisis in Greece, as restrictions were put on fiat money systems, including the amount of currency bank account holders were allowed to draw out per day (just 65 euros for a while), so more people turned to Bitcoin. Given that the cryptocurrency exists outside of the controls of the fiat system to a large extent, this perhaps should not be surprising.
The trend has continued, and the 50% rise in value of bitcoin over the first 6 months of 2016 is an indicator of that rise in interest too. As financial uncertainty, and reducing trust in the traditional systems continues, this increased interest shows no signs of slowing down, and a recent report by non-profit organization FEE that looked into the use of cryptocurrency in Brazil confirms this. Brazil has been in political turmoil for a while with calls of corruption throughout government seeing mass demonstrations in the streets. What the repost shows is that with this ongoing issue as a backdrop, the total volume of Bitcoin trading in the first 6 months of 2016 exceeded that of Gold spot trading in the same period for the first time ever.
This is a very different situation to Greece, in that the economy itself in Brazil is growing, it is the political environment that is causing the uncertainty, and yet Bitcoin is still an asset investors are turning to. For everyday investors today, buying Gold is not a straightforward business, a fractional market means owning a promissory note for gold is not owning real gold, and in a crash would not always be protected, and in that situation it is clear those without the large funds to secure physical gold are looking at digital currencies, Bitcoin especially, as an alternative.
This is actually an exciting time for the industry itself and for the entire financial system, as people are making the transition to digital assets rather than that most stable of precious metals, Gold, it suggests that there really is room for an alternative and normal, everyday people are very willing to embrace it.