Irish traders ‘avoid Bitcoin bubble’

Irish financial traders may have dodged the Bitcoin bullet as the value of the crypto-currency collapses following a Chinese ruling that it is a product, not a currency.

Bitcoins are a digital ‘currency’ that first appeared in 2009 and were developed by a computer programmer using the pseudonym Satoshi Nakamoto. Its value had rocketed on the back of the financial crisis in Cyprus, recently nearing parity with an ounce of gold at $1,250.

Following the announcement by China’s central bank that Bitcoins are not a currency, the price of a single Bitcoin fell to $870.

Barry McCarthy, the chief executive of Casimir trading and a lecturer in financial trading with Independent Colleges Dublin, said he has never met an Irish trader who took the Bitcoin plunge.

“I’ve never met a single Irish person who has traded it. It is concentrated in the hands of Russians and Chinese,” he said.

Russians rushed to Bitcoins as a way to move their money out of Cyprus to avoid losing their savings in March, when 47.5% of deposits over €100,000 were used to recapitalise banks.

In China, Bitcoins became popular as a method to bypass strict rules regarding foreign exchange. Bitcoins were seen as a way for wealthy Chinese to get money out of China.

Mr McCarthy said he has been monitoring the rise of Bitcoins for the last two years and believes it was a bubble situation once it had passed $200 a Bitcoin.

He said one of the reasons that Bitcoins had fallen in value was that they were in competition with a physical commodity, gold.

He said: “It has been pushing a psychological barrier at $1,250 per coin. It can’t seem to get through the price of an ounce of gold. I think I know which I’d rather have, an ounce of gold or a string of code.”

UL economics lecturer Stephen Kinsella said: “Bubbles burst, there’s nothing special about this one.”

What is unique about Bitcoins is the manner in which they are “mined”. Computers have to complete increasingly difficult mathematical equations to release a unique code or address. The system is limited so that as more Bitcoins are produced, the computing power required to release them gets increasingly difficult. The number of Bitcoins that will be produced has been limited to 21m.