May 2017

bitcoin cryptocurrencies accounting

Bitcoin: Are you up to speed?

By: Odyssey General
Tags: accounting, bitcoin, coinbase, cryptocurrencies, ethereum, Litecoin

In Mid May Bitcoin surged up to $1,900 and Bitcoin now sits at around $2,141. Going back only 4 years Bitcoin traded at $14. This has been a rise of 153 times the original $14.

Certainly if you are reading this then likely you didn’t purchase Bitcoin at $14! Wikipedia lists 24 other crypto-currencies, the most recent being Zcash. You can probably bet us poor folks writing this blog didn’t purchase either!

Part of the demand is that the currency that can’t be manipulated by politicians and central banks, supply is limited and the difficulty of creating it gets harder all the time, rather than easier as economic principles are bent to order. So in essence it exists outside of our current economic theories.

We’ve recently seen that the spate of ranswomware shows cyber criminals will accept your Bitcoin, but that doesn’t explain Bitcoin. There are over 800 alternate coins ranging from Litecoin, to MikeTheMug. At the same time there is an increase in initial coin offerings (ICO’s) where investors can raise money in bitcoin or other established cryptocurrencies.

Recently the SEC denied two applications for bitcoin-related funds last month, which leaves Bitcoins in the hands of more experienced investors.

And with the volatility and opaqueness it is still too much of a risk for mainstream investors.
Despite being around for over 8 years, many comment that Bitcoin is more virtual than real.

And despite the surge of price in recent months, the currency still faces the existential question? What exactly is it for? Whether cryptocurrencies hit mainstream as an alternate currency to say Euro, Dollars or Yen is yet to be seen. It might even be an alternate to credit cards.

For now there is a battle developing among the interested parties. One side wants the crypto-currency to remain small and outside the influence of governments. The other side wants to see bitcoin go mainstream and is willing to accept more oversight. When companies can raise $12 million in 12 minutes in Bitcoin then you can be sure a lot of people are sitting up and taking notice.

The governments want to see regulation and the IRS recently ordered bitcoin services company Coinbase hand over records from 2013 to 2015 in an attempt to root out potential tax evaders.

Added to the cryptocurrency conundrum, there are a consortium of tech giants including Microsoft and JP Morgan Chase & co announcing a new financial platform based on Ethereum, likely to be seen as a Bitcoin competitor.

As Bitcoin is an open source software project without a recognized leader the controlling of the growth makes it difficult. There are now so many competing projects and products that make the future of Bitcoin difficult to forecast.

And with no experience in this currency, even the experts are a bit perplexed at calling the future on this crypto-currency.

One thing is for sure, with everyone talking about Bitcoin as a possible investment, and the likelihood cryptocurrencies will play some part in our financial life in the future, it’s an area Australian accountants need to keep monitoring.

Cash, Cheque, Credit Card or Bitcoin?