NEW YORK (MainStreet) —When government interference threatens the integrity of your savings—as happened March 16 in Cyprus when President Nicos Anastasiades announced stealing from all citizens’ bank accounts would cure the country’s banking ills—you might lose a bit of faith in fiat currency, vulnerable as it is to the whims of politicians and centralized banks.
Hence the buzz around Bitcoin, the encrypted virtual currency that began in 2009 and reached $1 billion in total value this week. In October of 2011, a bitcoin was trading at around $5. Today, by contrast, a single bitcoin is worth just north of $140.
Of course, it’s not as if throngs of Cypriots are clamoring to exchange their euros for bitcoins, but the precarious nature of the financial system in the Euro zone has drummed up more interest in the digital money, even from Americans.
“Cyprus fueled the fire of what people have felt since the financial crisis and the housing bust—mistrust of government, mistrust of banking,” said Alan Safahi, Founder and CEO ZipZap, the largest cash payment processor for Bitcoins with more than 700,000 locations globally. “It’s enough to drive people away from fiat currency.”By contrast, Bitcoin, as a decentralized currency that can be freely exchanged in a p2p fashion or between consumers and merchants, is immune to the undulations of traditional banking systems and safe from the ramifications of changing interest rates and inflation. And with a cap at 21 million bitcoins that will be issued (there are currently 11 million bitcoins in circulation), some argue Bitcoin will behave with more stability.
That’s why over the last six months, Jonathan Waller, a 29-year-old Brit working in Tokyo as a video game developer, has put 95% of his savings into Bitcoin. He also runs the Tokyo Bitcoin Meetup group, which has had a 400% increase in size since last month in light of the attention garnered from Cyprus.