News Story report / critique - Essay Example

The currency has demonstrated a high level of volatility is associated with a bubble that compares to Holland’s 17th century experience in which prices of a type of bulb increased abnormally before falling drastically. Economic consequences followed this but Bitcoin demonstrate scope that incorporates trends in the global economy. Volatility in the currency’s value has been significant and is symmetric to trends in values of real currencies. Bitcoin currency unit was for example valued at about $13.

51 in January. This rose to over $ 265 in April, the same month in which the currency’s value is now $ 100 and the British pound has followed an almost similar trend. While speculation causes currency’s volatility, Bitcoin’s case further relates to the system’s good design and its association with real currencies. The currency’s system overcomes challenges of counterfeiting and supply of outstanding currency that faced previous online and virtual currencies. It has no currency backing and introduction of new currency into the system is strictly monitored (Sivy 1).

Currencies such as Bitcoin could possibly intimidate government policies because their systems are difficult to control at national levels and strict measures against then may force investors out of a country. Governments will however try to control these currencies as Bitcoin promises more developments in online and virtual currencies (Sivy 1). Review The article is explorative with comprehensive information on potential effects of Bitcon on national and global economies. In identifying volatility of the currency and past effects of such volatilities on economies, the author communicates fears that Bitcoin offers a threat to economies.

Application of a historic example on price volatility justifies this concept and validates the author’s position that volatility leads to losses. The losses occur after speculative high prices attract people to increase demand before the prices fall to very low rates. When this happens, investors lose the excess value of their purchase price over the prices at which they sell the currency (Sivy 1). The author also succeeds in developing an association between trends in Bitcoin value and values of other currencies and downplays a possible perception that Bitcoin is another simple bubble.

The time series review of Bitcoin’s value that rose, significantly, before falling and the similarity to the trend in value of British pound explains a relationship between the virtual currency and the real currency. The value of Bitcoin moved from its $13.51 to $ 266, about 20 times its initial value before assuming its current value of $ 100, a value bellow half of $ 266. The British pound also gained value from $ 1.62 to $31.9, almost 20 its initial value, before its current value at $ 12 that is slightly below half of $ 31.9. The similar trend between Bitcoin values and values of British pound, a major international currency, establishes validity of the author’s position that the virtual currency and real currencies have significant relationships and that Bitcoin is fundamental to shaping the global economy (Sivy 1).

I also concur with the author’s opinion that the realized gains in Bitcoin’s value are not only dependent on speculation but the currency’s system that is secure from manipulations. This is because investors, especially long term investors, makes decisions from diversified factors such as security of