Bitcoin has demonstrated its fragility yet again with a massive slump following an official announcement from the South Korean government that it would take steps to ban the cryptocurrency. This comes on the back of unconfirmed but compelling stories that North Korea succeeding in making hundreds of millions off the currency.
The story itself is less impressive than the immediate and sustained drop in Bitcoin value that may have governments and anyone else capable of spreading reputable rumours, interested in how the next few days turn out. In fact, conspiracy theorists will be salivating that the Wall Street Journal published an article saying that the Ministry of Justice is considering a complete closedown of all cyber currencies in the country – without citing any direct sources. The article created quite a stir on its own and, according to some speculators, was responsible for the acceleration of an existing downward spike.
Uncertainty kills currencies as has been demonstrated on numerous occasions, especially when nothing robust underpins them. The examples of Third World countries and small city-states struggling to maintain value in their currency will likely be scaring investors and adding to the number of questions being asked as to the actual viability of a currency that isn’t predicated on a tangible economy.
Over the next few weeks and months, Bitcoin will be challenged again and again with stories and reports, both reputable and less so, that will impact on more than just short-term values. Investors around the world will be fascinated to see how the currency responds and if a downward spiral is counterbalanced with a surge. This confidence or lack thereof will potentially have a profound impact on the long-term viability of the currency as an investment medium, and a genuine currency beyond that. At the moment, Bitcoin is having a moment in the sun but should a tipping point be reached where, “common sense,” says that investing in the cryptocurrency is too risky- especially with political tensions the highest they have been around the world since the Cold War- there could be disastrous ramifications for those invested in bitcoin and advocates of a free-market currency.