The world is abuzz over Bitcoin. The virtual currency has become a global phenomenon reaching an all-time high of more than $250 USD in early April. That record was short-lived however, as a near-panic sell-off halved its value within days of reaching the milestone.
We recently added Bitcoin to the OANDA Currency Converter. We admire it as an interesting experiment in financial innovation and, because we're financial innovators too, we share the excitement such disruptive technologies can bring to mature industries and markets.
Also, with more than 190 currencies and precious metals already available for conversion on our popular widget, including Bitcoin appealed to our sense of great customer service. Now, anyone who wants to calculate the conversion of currencies (or gold and silver) into Bitcoin can use OANDA’s popular converter as their tool of choice.
Despite the increased awareness around the cyber currency, OANDA has no plans at this time to introduce Bitcoin as a tradeable currency to OANDA’s fxTrade platform, or to accept Bitcoin as a method for funding fxTrade accounts. By adding Bitcoin to our Currency Converter, we are acknowledging – in a very real way – the wide-ranging interest Bitcoin has generated as a virtual payment system.
What is Bitcoin?
Created in 2009, the Bitcoin network was originally intended to offer a means of payment through a peer-to-peer version of electronic cash. The idea was to enable online payments to be sent directly from one party to another thus bypassing financial institutions altogether.
According to the European Central Bank, “a virtual currency is a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.”
Compared to the global forex market as a whole, the number of people dealing in Bitcoin is small; still, it is a highly dedicated and motivated group of evangelists. In order to attract a wider, more “mainstream” audience, however, price stability and the ability of the underlying infrastructure to fend off such things as the dedicated denial of service attacks which helped extend the recent devaluing must be resolved.
The future of virtual currency exchange
What’s most fascinating about Bitcoin is that it’s driving public discussion on what role virtual currencies and digital currency exchanges may take in the global marketplace. Indeed, OANDA’s CEO K Duker remarked during his Reddit AMA session in February that the focus on digitized currency exchange will become more prominent in the future.
Bitcoin is one of several virtual currencies that have emerged in recent years and is by far the most popular today. While other virtual currencies such as Amazon Coins or Second Life's Linden Dollars are supported by private commercial entities, Bitcoin has no corporate backer. Instead, Bitcoin's support comes from a diverse ecosystem of users, miners, and speculators that have sprung up around it. While its future is unknown at this juncture, Bitcoin will definitely be an interesting technological and monetary experiment to watch unfold.
Other noteworthy points about Bitcoin:
*While financial intermediaries are needed to convert local currency into Bitcoin (BTC), once funds are in Bitcoins, no financial intermediary (other than the Bitcoin network) is needed to transfer that money worldwide
*Bitcoin wallets can be stored on your computer or smartphone, encrypted in the cloud, on a piece of paper, or totally in your head (a “brainwallet”)
*Currently, BTC/USD trading volume is in excess of 200,000 BTC a day and growing
*To date, about 11 million Bitcoin units have been issued out of the 21 million that can be circulated
What are your thoughts on our decision to add Bitcoin to the OANDA Currency Converter? Please share your comments in the box below.