The value of a bitcoin seems to have reached a peak for the time being.
Each unit of the digital currency had reached almost $1,300 earlier this month, thereby becoming more valuable than an ounce of gold.
But now, the price of a bitcoin has fallen dramatically – by 18 per cent, to $1,000, in recent trading – after a crucial decision by the US Securities and Exchange Commission.
On Friday, The SEC rejected an application for a publicly traded fund based on the cryptocurrency.
The fund – which was supposed to be what’s known as an exchange-traded fund, or ETF – was proposed by Tyler and Cameron Winklevoss, the American sportsmen and internet entrepreneurs famous for their argument with Mark Zuckerberg over the origins of Facebook, and generally referred to as the Winklevoss twins.
The decision by the SEC was apparently based on its concerns that “significant markets for bitcoin are unregulated”, which is what the filing on its website says, according to Bloomberg.
It may still be possible that the fund is listed in the future if agreement can be reached on certain aspects of surveillance.
Nonetheless, the SEC ruling has ended the surging price of the digital currency for now, and may have discouraged a number of other applicants for bitcoin ETFs.
In a statement, the SEC says: “Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated.
“The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.
“Should such markets develop, the Commission could consider whether a bitcoin ETP [exchange-traded product] would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act.”
In a responding statement, Tyler Winklevoss says: “We remain optimistic and committed to bringing Coin to market, and look forward to continuing to work with the SEC staff.
“We began this journey almost four years ago, and are determined to see it through. We agree with the SEC that regulation and oversight are important to the health of any marketplace and the safety of all investors.”
Despite the rejection by the SEC and the subsequent dip in the value of bitcoin, the overall value of digital currencies is said to be at an all-time high.
According to CryptocoinsNews.com, the total market capitalisation for all digital currencies is currently at almost $25 billion, with 24-hour trading volumes at around $1 billion.
Bitcoin is, then, not the only digital currency, and while it has seen a possibly-temporary fall in its value, others, such as ethereum, have made “considerable gains”, according to CryptocoinsNews.com, rising to $30 per unit, making it the second-most valuable digital currency after bitcoin.
Another cryptocurrency to have done well in recent times is dash, which went from $8 to $37 a unit in two months.
Most – or probably all – of these currencies are based on the distributed ledger technology, which is the basis for blockchain.
Blockchain is currently being researched by governments and banking institutions around the world in attempts to establish what it is, and what it wants.
Some claim blockchain is part of an alien invasion which could destroy monetary systems as we know them. Others claim befriending the aliens will lead to untold riches.
For the time being, the SEC has apparently gone with the paranoid.
Blockchain is said to have been invented by Satoshi Nakamoto, who claims he only wanted to make the Internet more secure.
Blockchain could be described as a digital record of an agreement between two parties, or digital handshake as some call it.
The record of that digital handshake exists on millions of computers simultaneously, which supposedly makes it more secure from hackers.
That record also exists as a shared or continuously reconciled database, is public and easily verifiable.
A far better attempt at an explanation can be found at BlockGeeks.com.
The lack of understanding of what blockchain is and what it does – as well as the growing power of the digital currencies the technology is giving rise to – is probably one of the reasons for Lloyds Banking Group outsourcing almost 2,000 jobs to IBM.
The contract is worth £1.3 billion and is intended to save Lloyds £760 million in overall costs.
Banking workers’ unions claim the deal could make the bank more vulnerable to cyber attacks, but the real motivation for Lloyds may be its desire to catch up with its competitors when it comes to understanding and possibly utilising blockchain technology, and a link-up with IBM might help.
Lloyds has reportedly been one of the quietest banks when it comes to blockchain technology development, but has recently increased its presence at events relating to the trend.