Bitcoin was in the news once again recently when a decision by the New York Stock Exchange gave it new legs as a legitimate company and resource. Specifically, the NYSE created an index meant to take over as the default location where investors can track the value of bitcoin. This development on its own shouldn’t make any enormous difference in the market for the digital currency, but when considering the long-term, it appears to be an indicator that such currencies are being taken seriously and could soon begin to factor into everyday life and investment practices.
But what exactly does that mean, and what is bitcoin’s place in the global market? It’s hard to answer these questions completely at this stage, but they’re certainly questions that people are beginning to talk about.
An article about this topic at Cointrader made perhaps the most interesting point, which is that it isn’t necessarily bitcoin that will have a lasting impact on global markets, but the concept of digital currency in general. According to Cointrader, “We’re not only witnessing the birth of bitcoin, but also the birth of an entire digital, global, crypto-coin market” (crypto-coin or cryptocurrency being other terms for “digital currency”). This suggests that the very conversation about what impact bitcoin can have on global markets is by nature incomplete, and that the more important conversation is whether or not the underlying concept of cryptocurrency will shift worldwide finances.
In addressing this question, it’s also important to recognize that the rise of digital currencies isn’t just a reflection of investor or user enthusiasm, but will also depend on government adjustment and regulation. In addressing the question of which countries accept bitcoin as a currency, an article at FXCM states that “categorically, governments do not accept bitcoin as a transactional currency between an individual and the state.” This means that while bitcoin and other cryptocurrencies may be allowed to flourish in peer-to-peer transactions, it appears that for now governments will still require state currencies for transactions such as paying taxes. And this alone could impede the digital currency takeover that some foresee; as long as state currency is legally necessary for vital transactions, it’s hard to imagine it being overtaken.
Ultimately, it seems that it’s best to answer the question of digital currency’s place in the global market by splitting it into two parts:
Will the exchange of digital currency soon become a more popular means of conducting business and everyday transactions in much of the world? It certainly seems likely. Bitcoin, while still subject to unpredictable pricing patterns, appears to be gaining some steam and respect in the market. Also, as the Cointrader article noted, it’s going to have competition when other popular digital currency options arise. For the sake of convenience, novelty, and even investment (getting in early before digital currency values rise), many will likely look to start using them.
Will digital currency take over for ordinary currency any time soon? Probably not. As mentioned, state governments have the ability to essentially limit the rise of digital currencies by requiring state currency for certain types of payments and transactions. This isn’t to say governments may not ultimately be pressured to alter their stances, but for now it looks like there are still many years, if not decades, to go before cryptocurrency achieves any sort of mass takeover of global markets.
