Bitcoin hit a new record high of over $72,000 on Monday after topping $70,000 for the first time on Friday. The cryptocurrency has been boosted by a flood of cash into new spot bitcoin exchange-traded funds as well as hopes that the Federal Reserve will soon cut interest rates.
Bitcoin is a type of cryptocurrency – a digital currency designed to be used by people without the need for centralized regulation by governments or other bodies. Exchanges are tracked by distributed ledger technology (DLT) such as blockchain, according to a Bank of Israel 2022 report. These are technologies based on encryption. Exchanges are publicly documented and cannot be reversed; therefore the exchange of these currencies requires no centralized body to govern them, said the report.
Bitcoin was the first cryptocurrency, in what has become a widely expanding field with many more types of digital currency, the report added.
Bitcoin technology is open-source, meaning the source code behind the technology is available, and “nobody owns or controls Bitcoin,” according to Bitcoin’s website.
A desired alternative to government-issued funds
The decentralized structure of Bitcoin appeals to those who want an alternative to fiat money issued by governments. Some benefits of this decentralization include transparency, insulation of users from bank fees and bank failures, and ease of global payments. It can also, theoretically, isolate users from instability in their own country’s economy.
Critics say that Bitcoin has been unable to replace fiat money. “Something that moves 5% a day, 20% in a month – up or down – cannot be a currency. It’s something else,” former options trader and risk analyst Nassim Nicholas Taleb told American business channel CNBC in 2021.
“I realized [Bitcoin] was not a currency without a government. It was just pure speculation. It’s just like a game ... I mean, you can create another game and call it a currency,” Taleb added.
Reuters contributed to this report.