Irish Examiner view: Price volatility in the  unregulated environment of cryptocurrencies

A report from the US Treasury warns of the risks of bank runs, consumer abuse, and payment problems from dealing and trading in cryptocurrency

Bitcoin, the original cryptocurrency, is said to be worth $1.7tn (€1.45tn); five years ago, a single bitcoin sold at $500, mow it is priced at $62,000, a growth of 12,300%.

It’s a fair bet that most of us wouldn’t recognise a cryptocurrency if we tripped over one, much less know what to do with a non-fungible token, or where to find a blockchain.

It doesn’t help that many of the big names on this new frontier present as though they have been conjured from the minds of science fiction writers such as Arthur C Clarke, Frank Herbert, or Isaac Asimov. 

Bitcoin has become familiar through repetition but some of the other leading companies Etherium, Polkadot, Dogecoin, and Shiba Inu sound as though they would not be out of place as locations or characters in a PlayStation 5 game. 

Equally disorientating are the market capitalisations which attach to these organisations. 

Bitcoin, the original cryptocurrency, is said to be worth $1.7tn (€1.45tn); five years ago, a single bitcoin sold at $500, mow it is priced at $62,000, a growth of 12,300%.

Back in the old days of analogue currencies and when trading floors were experiencing their first flush of liberation, as they would see it, following the deregulations and Big Bangs of the 1980s there was a famous Oscar-winning film called Wall Street, and an even more well-known representation of a corporate psychopath named Gordon Gekko.

In one of the most memorable speeches in the movie Gekko told us: “Money itself isn’t lost or made. It’s simply transferred from one perception to another.” 

Dealers and traders in cryptocurrency proclaim many advantages, including transaction security, to these new forms of exchange. 

However, a new report from the US Treasury warns of the risks of bank runs, consumer abuse, and payment problems which could potentially threaten or contaminate the wider financial system. That’s the one used by most of us.

There are at least nine platforms on which it is possible for Irish citizens to make purchases in this rapidly developing market. 

Three years ago the Central Bank warned consumers about the exposures of buying or investing in virtual currencies and the prospects of extreme price volatility in an unregulated environment. 

This year further warnings were added about the introduction of a supervisory regime to counter money laundering and the funding of terrorism.

However, the prospect of enormous returns is powerful juju for speculators and those who like a gamble. 

And, although this brings to mind the well-known aphorism about a fool and their money being soon parted, there have been losers on a currency which launched through associating itself with the Netflix hit series Squid Game. 

The South Korean dystopian drama, in which people compete against and kill each other for a jackpot prize, was watched by 111m people.

Although the TV programme and its advisors have no connection with the token riding on the back of their programme its value surged by 300,000% post-launch reaching a headline unit cost of €2,457. And then it disappeared, along with its website.

It was proclaimed as a currency that would allow members of the public to join an online version of the game due to start this month. 

While it is possible, at one level, to admire the elegance of this trick, this is not a victimless scam. 

This confluence of finance and technology companies into new entities which are not banks, but which possess the power to shock the economy in ways that many people will not understand, is a tangible danger that is under-debated, particularly when some nations want to place themselves at the heart of this new, so-called, economy. 

Singapore, for example, wants to transform itself into a global 'crypto hub' with its bank regulator stating: “We think the best approach is not to clamp down or ban these things.” 

Having endured the bank-led crash of 2007 to 2008, the pandemic, and the various cyber-attacks which have damaged the country there is not an inexhaustible supply of patience for dealing with future challenges generated, but not independently scrutinised, from the fintech sector.