The trading team at PlutusFX goes off-piste this week and looks at alternative currencies:
The value of the world’s best known alternative currency, the Bitcoin, has continued to deteriorate this year. Currently standing at $237.03 USD per ‘coin’, it’s well down from the $313 at the start of the year and the close to $1000 all-time high.
Regardless, the bitcoin continues to be seen as the leading crypto currency and its uses are extending. This week saw the launch of the ‘bitcoin ring’. Marketed as an engagement ring, it is a 3D printed ring with a QR code taking the place of a jewel. The code then allows the user to see how much ‘money’ is in the corresponding account.
It may be to the surprise of some that the bitcoin still has any value, given the much publicised thefts that took place last year, but the death of alternatives usually comes in the form of regulation. Such regulatory development is embed in history. In the States, before the civil war, there were 1600 different banks and corporations all issuing their own bank notes, which post-war led to the regulation and single currency issuance under the federal reserve system.
Local currencies continue to have a place, designed to boost local commerce. The Bristol Pound for example, launched in 2012 continues to be traded. It is backed by the Bristol Credit union and hence falls under FCA regulation, with all transaction taxed in the same way as Sterling. Hence in this case it won’t be regulation that will prevent its use, but rather it relies on the continued confidence of the local community.
One of the most bizarre alternative currencies that did fall foul of the law was Tide Detergent! Such is the popularity and strength of the brand in the States that it became the currency of choice for drug dealers. Users of crack cocaine could trade the product to get their fix, stealing the detergent in massive amounts from grocery stores. This worked as the shop lifting of the low value item was much lower risk than the theft of higher value items, and if caught, the punishment much lower, being a small fine, rather than jail. The Drug dealer, accepting the alternative payment, being able to sell on the detergent in large amounts to Wholesalers, who would then ultimately sell the Tide bottles back to the grocers, who would be constantly running short of one of the top three branded items in the USA.