What do government bonds and bitcoin have in common? Some investors think they're just a bit safer than the euro at the moment.
(Nobody gets me Bitcoins image by Zach Copley, CC BY-SA 2.0)
Economic uncertainty in Europe is at an all-time high, and it doesn't look to be easing anytime soon. The levels of Greek debt are astronomical. If anti-austerity parties gain power in the upcoming Greek elections, and refuse to cut government services, they're likely to default on that debt, meaning financial turmoil for all nations in the European Union. As a result, European investors are shifting their cash out of Europe and into other, safer investments, like the US Treasury Bonds, and, yes, even bitcoin.
Bitcoin is a virtual currency created by applying computer processing power and time to solve a particular problem. Bitcoins can be transferred over peer-to-peer networks, and can also be used for real-world purchases. The advantage of bitcoin as a currency is that it is decentralised, and the supply of bitcoins is controlled by an algorithm, rather than a bank or a government entity, meaning that it's not influenced by the regular market or political pressures that other currencies are.
This means that none of the economical factors currently affecting Greece, Spain or even Australia will change the value of bitcoins, and, as the world stares down the barrel of Global Financial Crisis mark II, that has got to be pretty good, right?
According to the Financial Post, New York-based company BitInstant, which specialises in transferring funds into bitcoins, is seeing European trade into bitcoin "skyrocket". The company has reportedly said that demand is so high that some investors are asking to mail euro currency to BitInstant to get it converted into bitcoins.
It's still early days, and bitcoin is not without its share of problems. A bitcoin exchange was hacked in June last year, resulting in around 2000 bitcoins being stolen, and a massive drop in value for the currency from about US$30 per bitcoin to about half of that amount. Added to that, it's also apparently a health risk; our UK sister site last year reported that a bitcoin miner suffered heatstroke caused by staying in the same room as four overclocked machines used for bitcoin mining.
However, if bitcoin defies these problems and becomes more mainstream, then perhaps the ABC was hasty in disciplining an IT employee for mining for bitcoin on the ABC's production systems.
Updated at 10.05am, 14 June 2012: Corrected the figure to 2000 bitcoins were stolen in the Mt Gox hack.