The current price volatility trend doesn’t make bitcoin digital currency a reliable repository of value, at least at the moment, financial advisor, George Cotsikis, said in an interview with RT.
The bitcoin exchange, MTGox, went offline twice on Friday,
first, in order to install new hardware to help cope with increased
trading volumes and then to avoid a "stronger than usual"
hack attack.
The shutdowns led to a round of panic selling that forced values to
plunge from record-high $260 for one bitcoin on 10 April to less
than $100.
Financial advisor, George Cotsikis, believes that there’s nothing
extraordinary about Friday’s events as one shouldn’t expect stable
prices from bitcoin in the future.
RT:Are you a Bitcoin convert yourself?
George Cotsikis: I have been following quite a bit on what
has been happening; I’m an interested party not an investor. I
think it is a trustworthy currency algorithmically. It is very
elegant, mathematically based structure which is quite robust and
very beautiful. However as investment, as a possible store of
value, I think it is pretty bad.
The volatility that we have been seeing in the last few days is
characteristic of what we will be seeing in the future with
bitcoin. So I’m not sure that the people who have just started
going into this market actually realize the issues they could be
facing.
RT:The value has been going up and down quite abruptly
over the last couple of months. It reached its peak earlier this
month, I guess over Cyprus, but is this kind of thing pie in the
sky or is it the shape of stuff to come?
GC: Long term, math-based currencies are the stuff to come.
However, I don’t think that bitcoin is the answer yet. It has a
very inelastic supply structure, it has no central authority, which
is interesting philosophically but in practice is a problem. We
just had a one-day stagnation from $260+ dollars to $105. This is
not a store of value, at this stage at least.
It is also a very thin market place which is really easy money made
by speculators, so from a technological standpoint it is a future.
But is it a short term or a medium term solution? No.
RT:How is the value determined?
GC: Short demand and supply that is part of philosophy of
the bitcoin. There’s no central authority which is very interesting
and probably the way to go. But only if there is enough demand and
supply volume, if the liquidity is good enough to make sure that
the price is achieved. There is some semblance of where the fair
value for this should be. At this point in time, the supply curve
is very, very limited. Bitcoins are supplied according to a very
specific algorithm through time. So unfortunately the demand and
supply will produce very volatile prices.
RT: Some converts, one couple in America in Texas,
they’ve sold their house with it and another couple have sold their
Porsche. Were they chucking the money in the bin, as far as you’re
concerned?
GC: Yes, I think especially when you [sell] a house. There
is a lot of hot dust, people want to get out of currencies, which
are to a large extent manipulated. They feel very worried about the
financial system, especially after Cyprus, and they should be.
Southern Europe will possibly not be in the same shape, banking
wise, in the next few years.
But there’re a lot of possibilities, very good alternatives in real
estate, in precious metals, in precious stones, in private and
public equities and intellectual property which are much better
stores of value than bitcoins.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.