Bitcoin’s future as a digital currency will depend on consumer confidence
GRAND FORKS — Bitcoin's popularity is on the rise, and with it skepticism and excitement have mounted for the digital currency.
Its value against the U.S. dollar has exploded in recent months. One bitcoin was worth about $780 a year ago today but is now worth more than $17,700. The currency finished its first week of trading with gains of about 17 percent as of Friday morning, Dec. 15.
The sudden surge comes after a decade of testing and exploring technology that can utilize bitcoin and other digital currencies, said Daniel Schott, an educational advocate for the North Dakota Blockchain Group. Bitcoin also is being used by businesses and organizations around the world, which means it is gaining confidence like other currencies, he noted.
"I think people are skeptical of emerging technologies, and rightly so because new technology doesn't always work when it first comes out," he said, adding organizations are starting to see the value of using digital exchange. "That organizational adoption of this technology is helping to drive trust by the consumer into cryptocurrencies."
As the digital world expands into daily business, the likelihood digital currency will become a part day-to-day operations increases, Schott said. His organization is made up of a diverse group of business people across the state who hope to educate the public on cryptocurrency and digital platforms for exchanging goods, ideas and other tradable items.
It's dangerous to say digital currency will never take off, University of North Dakota economics professor David Flynn said. Those who do may be left out of financial markets, so it's important to have a balance of skepticism and acceptance.
"If you feel people are not using cryptocurrencies and are not adopting to it, you are living under a rock," Schott said.
Though Bitcoin is the best-known digital currency, it may not be the final digital currency that is used in transactions, Flynn said. It's an innovation that will follow the innovation cycle, meaning it can go through ups and downs, he said.
"Anything that gains acceptance is going to go through some periods of volatility," he said.
Released in 2009, more companies across the world have begun to adopt Bitcoin. It is not generally accepted as a currency by everyone, Flynn said.
"That's where it falls short at the current moment," he said.
Still, it is gaining popularity as more businesses use it to trade goods. As it gains confidence, it gains value, like any other currency, Schott said.
"People start noticing that and they have a fear of missing out," he said.
People also are more open to using digital or less physical ways to pay for items, Flynn said. For example, fewer businesses accept checks as credit card use and digital payments gain popularity.
He also noted paper money once was a new concept and took time to gain popularity, just like any type of currency that has been introduced throughout history. The strength of any currency depends on the confidence of the consumers who use it, he said.
Bitcoin does have a history of boom and bust cycles since it is a new technology, Schott said, and the current surge likely will diminish or even collapse. Both Flynn and Schott advised against investing all of a person's funds into the currency, adding it's not advisable to invest everything in one tradable item.
Investors should do their homework and educate themselves on the currency before investing, Flynn said. If an investor has enough education and research on Bitcoin or other cryptocurrency, he or she can test the ups and down with a limited amount of money to get a feel for the market, Schott said.
"I like to use the term lunch money," he said. "You might consider buying with your lunch money."