In what would be the shocking news of the day (were it not an April Fools’ gag), Greek Finance Minister Yanis Varoufakis was quoted stating that Greece will adopt the bitcoin if Eurogroup doesn’t give Greece a deal. In response, 99% of the world (that actually cares to read the news) says what is bitcoin?
Bitcoin is a cryptocurrency that was created in 2009 and farmed through the internet by a process called mining. It’s a digital currency that is transferred directly from person to person over the internet. It’s also a universal currency that can be used in every country without exchange conversions. There are many benefits to using bitcoin as it expands outside the central banking system that only is available to the industrialized world. Bitcoin expert and author of the book “Mastering Bitcoin” stated,
“To experience the future of money. To gain a glimpse into an exciting technology. To learn about how money could be in the future and also become aware of how limited money and banks are today. For the “other 6 billion” who don’t enjoy international, control-free banking as we do, bitcoin represents an opportunity to become part of a global economy which up till now did not exist. For those users, bitcoin is more than just a curiosity, it might be a doorway to connect to the world.”
There are many other benefits to bitcoin as well:
1) Cheaper transaction costs.
2) No artificial taxation to the central banks for the hard work of printing money.
3) 50 million USD transacted daily using bitcoin.
4) 82,000 merchants currently accept bitcoin and many more will if the Greeks accepts it.
5) Completely open source.
6) Easy to use and send money throughout the world without the need of the corrupt banking system.
7) Global security: We live in an online society where we all purchase products online. When we go out to dinner we use debit cards. These transactions are not only tracked but personal data is also tracked and recorded. This means people who use credit or debit cards are not only tracked, they are at risk of identity theft, fraud, or credit card theft. Bitcoin protects against this as personal information is not transferred in the utilization of bitcoin. How the Greeks would get around this will be interesting to watch unfold if they were actually accept bitcoin as a national currency.
However, that does not mean the Greeks would not have risks. First of all, bitcoin is not currently insured and is subject to big increases and decreases in volatility. If the Greeks accept were to accept bitcoin in the future, their currency would be prone to big increases and decreases in volatility. FIn the last three years alone, bitcoin value has went from $10 USD per bitcoin to $1200 and now priced at $250. This is scary to think about, but consider what is happening in the emerging markets: currencies with the massive depreciation and one realizes that bitcoin could actually solve the problem of fiat currency risk. I wonder if the Russians in December of 2014 wished they had bitcoin when their currency devalued by 60% against other currencies in a week.
While there would certainly be risks to the Greeks adopting bitcoin, I think it would be an innovative way for the Greeks to combat the problems they are experiencing with debt and currency valuation. As Greek Finance Minister Varoufakis was quoted as stating:
“The future starts in Greece and we will be the first country to use the currency of the future, a currency that doesn’t allow third parties to tell us what to do or how to live, this is the Greek thing to do. We’ll go to Bitcoin, we will be ahead of all the world economies and although it may be painful in the beginning, Greece’s economy will thrive in the long term.”
It would be painful in the beginning and there would be risks involved. However, if the Greeks were to leave the euro and go back to the drachma, they would certainly devalue at least 50% in the beginning, which in my mind would be as risky as going to a currency that is already valued against the other major currency and accepted throughout the entire world.
I believe the biggest risk is ignorance of the currency.
—
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
4 Replies to “Greeks and Bitcoin”
wow, $10 – $1200 a coin! That is insane, wish I would have been hip to that when it was going down!
Given the date that this was released, I believe that it was a massive April Fools joke. Happy April Fools all!!!
Greek Finance Minister Yiannis Varoufakis has been the target of mainstream media over the past few months since he’s easy to make an outrageous story on. He’s very outspoken and unorthodox for a politician (his background is as an academic economist and a college professor). He has been involved with a couple media gaffes including a French photo shoot with his wife where they were living extravagantly while many Greek people are in poverty and was also in “Fingergate”, a video of a conference he gave a year or two ago in which he referenced that Greece should give Germany the finger and default within the Euro (by the way, not a bad idea) but a German satirist confirmed that he had doctored the footage and recorded the incident. Shortly after those incidents, a reporter stopped him in the hallway and asked him if he was “a liability to his party”.
I’m not sure if Varoufakis was in on the writing of the article (which you can read here: http://greece.greekreporter.com/2015/04/01/yanis-varoufakis-greece-will-adopt-the-bitcoin-if-eurogroup-doesnt-give-us-a-deal/) but when he shared the article on his twitter, he wished everyone a Happy April Fool’s day in the same tweet. I’m not ready to believe that this is real, especially since there has been a detente of sorts with the Greek negotiations with their creditors. Tension between Greece and its creditors have incredibly volatile swings that are usually every 2-3 weeks (I just wished we could put the tension itself on a chart and trade it).
At the same time though, the bitcoin article was very cleverly written and would offer some viable solutions to some of Greece’s problems. I’m going to follow up on it later today.
So I confirmed that this was an April Fool’s Day joke by Greek Reporter. There were no talks by Varoufakis or anyone in Greece to turn to Bitcoin as the alternative currency should Greece leave the euro (although there have been talks that a contingency plan has been laid out that Greece will privatize its banks should they leave and default).
Greek Finance Minister Yannis Varoufakis actually wrote a blog about Bitcoin 2 years ago (http://yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-dangerous-fantasy-of-apolitical-money/) in which he discusses why an apolitical currency like bitcoin would be dangerous. He discusses the history of bitcoin, how its rare algorithm makes it similar to having a Gold Standard again since there would be a limit of 21 million bitcoin that can be mined, and the 2 fundamental flaws that prevent it from being a national or world currency. Bitcoin’s ability to be hacked, especially after the Mt. Gox scandal, will undermine consumer confidence, but it isn’t one of the main problems. The first is that after a while, when all the bitcoin is mined, you’ll have a deflationary problem as populations tend to increase, and so will good and services available to the public which will need to be denominated in bitcoin. You’ll eventually reach a scenario when goods and services will lose value on a daily basis that will undermine the economic activity. The second problem with bitcoin, which Matt alluded to in this article, is that it is incredibly volatile for any economy to be based on. You’ll have people trying to use bitcoin to purchase goods and services, but then you’ll have speculators like us (and to a much larger extent, major institutions) that will be trading bitcoin and affecting its valuation. You’ll eventually need a Bank of Bitcoin or some institution that will then regulate bitcoin, but would also undermine the purpose of bitcoin, a currency with no central bank or institution.
So in conclusion, while bitcoin would not make a viable currency to base an economy on, it has opened a Pandora’s Box of its possible use on a macroeconomic level. There have been talks of using bitcoin, or a similar parallel currency, to introduce liquidity in an illiquid economy like Greece. With capital flight leaving peripheral Europe (Greece, Spain, Ireland, Portugal, and even Italy) and making its way back to Germany, Luxembourg, and Finland, a parallel currency will be needed to keep these debt-laden nations liquid. One alternative that has been brought forward is FT-coin. Standing for “Future Taxes”, FT-coin would be similar to issuing treasury bills that is backed by the guarantee of future taxes (assuming the nation can collect taxes efficiently). This would be the solution for the nations in the EU that need the liquidity, but don’t have their own central banks that can print money. It’s still an idea in its infancy and has yet been determined whether or not it is legal by EU law. The fact that bitcoin has inspired the conversation and other economic alternatives could in itself be considered a great success.
good eval, thanks Solon. While I do not foresee a scenerio in the near future where crypto-currencies are used as a monetary solution for a nation like Greece that is part of the central banking system, I certainly see it being a solution or part of one, for countries that are not part of the same banking systems. It will be interesting to see the evolution of not only bitcoin, but our entire currency model over the next decade.
Comments are closed.