With headlines this week telling us 'Bitcoin is getting demolished', it's natural to continue giving the cryptocurrency a wide berth – but there are reasons to reconsider the advantages of Bitcoin.

Volatility 'normal' for new currency

'Bitcoin is getting demolished', said the headline on Business Insider earlier this week, on news that the cryptocurrency has lost 17 per cent of its value since the start of the year. But don't forget that Bitcoin was actually the world's best-performing currency in 2016 – and in 2015. What caused the recent fall was news that China is investigating Bitcoin exchanges in Beijing and Shanghai, which are suspected of market manipulation and money laundering. To add balance, Bitcoin was also the worst performing currency in 2014, pointing to the currency's ongoing rollercoaster ride.

This kind of volatility sounds deeply unappealing to risk-averse financial professionals but it's interesting that some payments experts are reminding us that, despite the negative headlines, there is much potential in cryptocurrencies. Nick Spanos, the founder of the Bitcoin Center NYC, pointed out that Bitcoin is still very much in its infancy and what we are currently seeing are the initial developments: “It’s like we just invented the wheel and soon we’re going to have the train, the motor car, the airplane - we're going to have all these things come about through Bitcoin and the block chain.”

Bitcoin myths

And ACI Worldwide's Christopher Taine writes that “this kind of volatility is normal for a new currency”. Taine goes on to 'bust some Bitcoin myths', which include:

• Bitcoin is illegal: Taine writes: “Today, criminal activity is mainly conducted in legal tender and according to Europol, organized crime earns around 1.5 billion EUR per year from payment card fraud. The FBI has said that criminals can't hide behind bitcoin because investigators can follow the money by tracking financial data publicly.”
• Bitcoin is insecure: In fact, Bitcoin account holders are highly protected.
• Bitcoin is not compliant: Taine argues this is not the case and that, in future, market players are going to be divided into those that are AML-compliant and those that are not.

Bitcoin ETF could boost confidence

While its volatility makes Bitcoin unsuitable for use in the mainstream corporate world, it does have real-world advantages. For example, it doesn't rely on the mainstream global financial payment systems, so Bitcoin can be sent to any recipient in any country – and contrary to some of the myths, it is traceable. If the currency stabilises, the advantages of using cryptocurrencies could become more attractive. In addition, by 11 March the Securities and Exchange Commission is due to announce whether or not it will approve a Bitcoin exchange-traded fund proposed by the Winklevoss brothers. If the SEC gives the Bitcoin ETF the green light, this could bolster confidence in the currency.