The arrival of Bitcoin, the post 2007 financial crash environment combined with trust in banks at an all-time low (Kemp-Robertson, 2013) synthesises an environment which challenges us to think about traditional central institutions and money. The prevailing practice of quantitative easing has caused concerns in the confidence of current money inflation in the likes of Warren Buffett, as interviewed by Evans-Pritchard (2013) in The Telegraph.
Rifkind of The Spectator (2013) writes that the impetus behind Bitcoin is that “it removes the need for trust in currency; trust in bankers, trust in governments”. As faith in the current system decreases people put their faith elsewhere, alluding to the 2013 Euro Cyprus bailout. Indeed there was a spike in both the volume being traded and the amounts being paid in Bitcoin that matches the period when the Cypriot government announced that all high Street bank savers deposits would be tapped (Arthur, 2013).
If the exchange value of a currency reflects the trust in a monetary system; during the 2013 Cyprus bailout high street the balance of trust can be seen between the Euro and Bitcoin. Banks were closed and individuals were denied access to their Euros with the possibility that the government would tap into savings accounts to aid a government bailout. The result was that on the 3rd of April 2013 The Guardian (Arthur, 2013) reported the value of and individual Bitcoin climbed to $147.00. Bitcoin’s ascent started on 19th March 2013 where it was valued at $47.00. Wider implications of this movement of trust are that the majority of the world relies on government back currencies. The Cyprus bailout is a proof of concept that people can now shift their assets into something outside government control. It is shown in the numbers that the public were not afraid to put their faith in the value of a digital currency; even above the 20 year old government backed incumbent.
“Bitcoin may or may not ultimately prove to be the right implementation, but it is a compelling concept that offers a window into a potentially profound paradigm shift in how we think about the future of money on the web.” (Ferrara, 2013)