Bitcoin, the most well-known cryptocurrency in the world, is rumoured to have become a new choice to park funds in the wake of the Greece crisis, as against gold. There are reports that as the Greek crisis deepens, the price of Bitcoins has been increasing and so have the number of inquiries from Greek IP addresses.

What is a Bitcoin?

A Bitcoin is a virtual cryptocurrency that lets the miner (or holder) of the currency make electronic transactions anonymously. By anonymously, it means that the Bitcoin miner is provided with an encrypted key to access his vault (or account) sans his/her name linked to it. A Bitcoin has no physical presence, that is, it cannot be printed in the form of notes or coins, and is not backed by gold, like normal currency.

Despite its virtual-only presence, the first Bitcoin ATM was set up in Vancouver, Canada, which also signalled toward its acceptance as a legitimate currency, a first of its kind for a virtual currency. A Bitcoin ATM lets users exchange cash for Bitcoins. It is even possible for new users to create an account on the spot to buy Bitcoins at the ATM, a departure from the conventional banking system that still requires a lot of paper work. The currency is also decentralized, which means it is free from any influence from any central banks in the world. More and more businesses have started accepting Bitcoins as a mode of payment.

Gold as a safe haven

Gold has been the most prominent safe haven investment to park cash during the times of economic uncertainty. Gold, over a period of time, gives higher returns as compared to other investment tools, and its value doesn't erode significantly on a day to day basis, which is the biggest fear during an economic crisis. And like Bitcoins, gold is also not affected by interest rate policies. It has been a historic hedge against inflation.

The Greece debt crisis and Bitcoins

Greece is now headed for a dead end, with its prime minister asking for a referendum on the country's future in the Eurozone. Debt negotiation talks have fallen through since, capital controls have been imposed on Greek banks, with a 60 Euro limit on daily withdrawals, and banks have shut for other transactions till atleast July 6. Greeks have been lining up to withdraw their money from the bank accounts. A 'No' vote in the referendum means that the country might be headed out of the 19-country single currency unit, which may have an impact on the value of the Euro.

During the same period, Bitcoin trackers have witnessed that the value of the virtual currency has firmed up consistently, much like it did in 2013 during an economic crisis in Cyprus when prices skyrocketed to $1,200, making people take notice of Bitcoins for the first time.

At the time of writing, the value of one Bitcoin to a US dollar was 262.57 (or Rs 16,996.97). The value has been rising consistently from June 25's $240.58 (or Rs 15,336.96) value, a 9.14% rise (or 10.82%), when Prime Minister Alexis Tsipras rejected the European troika's bailout plan, which has since prompted capital controls and bank lockdowns. This data is according to the CoinDesk Bitcoin Price Index (BPI).

The co-founder and executive chairman of BitPay Inc tweeted:

The #bitcoin market just needs a little GREASE to get unstuck. #Grexit price targets $610 and $1250 pic.twitter.com/A0ZJ0ppdfZ — Tony Gallippi (@TonyGallippi) June 28, 2015

It is due to this price rise, which is similar to the increase seen during the Cyprus bank lockdown, that there is a debate about Bitcoins being the new safe haven asset. What has been left out of most of these debates, engaged in mostly by Bitcoin miners and enthusiasts, is that the price of gold has also been consistently firming up as the crisis deepens. The UK Royal Mint said that the demand for gold was double the five-month average this month. That bitcoins is gaining popularity could have been a significant point of contention if the number of people flocking to gold had shown a decline. It also isn't easy to liquidate Bitcoins back to real currency like dollars or euros. Whereas gold can be liquidated into cash very easily, and even converted into jewellery for personal use, which still remains an investment.

A Reuters report also reported that there has been a 124% jump in the number of new visitors on Vaultoro, an online portal to trade Bitcoins and gold, from Greek IP addresses, again hinting at an interest in the virtual currency. However, the CEO of Vaultoro had later mentioned to Coindesk that during the same period it had seen a spike in interest from countries like Germany and Spain too.

Bitcoins might easy to acquire and transact, but there is still a long way to go for the virtual currency. The number of businesses that recognise the currency also may have increased, including the number of investors but it is not nearly enough to replace gold as the oldest and the most efficient safe haven asset yet.