Bitcoin: Is it really ripe for a Greek rally?

Bitcoin is in a 'trough of disillusionment'
Bitcoin is in a 'trough of disillusionment'   

The price of bitcoin hit its highest level since early April this week, amid reports that concerned Greek investors were flocking to the digital currency.

Bitcoin has enjoyed a solid week of gains, rising around 5 percent since Monday, according to industry website Coindesk. This came as Reuters, citing two bitcoin experts, reported that the rally was due to Greek depositors.

The decentralized digital currency is seen as having the potential to circumvent any capital controls that may be imposed in Greece, as the country edges closer to an important repayment deadline amid fears that the country could default on its debt.

Garrick Hileman, an economic historian at the London School of Economics, told CNBC that some Greeks did appear to be moving funds into bitcoin.

"(This is) in response to the possibility of capital controls, which would likely follow if Greece crashes out of the euro," he said.

Some in the industry are even likening it to bitcoin's mega-rally of April 2013, which occurred when capital controls were imposed in Cyprus as part of its international bailout.

However, experts are divided over whether Cyprus was the real driver behind the price increases, and some suggested that increased media attention -- especially in China -- was the real reason behind the rise.

Hileman warned that as the Cypriot crisis abated, bitcoin's price plummeted – which could explain the more cautious move in bitcoin's price in response to the ongoing Greek developments.

'Trough of disillusionment'

How to simplify bitcoin payments
How to simplify bitcoin payments   

Not everyone is convinced by bitcoin's value, however, with venture capitalists telling CNBC that there is little worth in the digital currency beyond the technology that supports it.

The digital currency had passed the "peak of expectations," Rob Moffat, principal venture capitalist at Balderton Capital, said, adding that people had become more skeptical towards it.

"It's now down in the trough of disillusionment," Moffat told CNBC. "The fashionable thing for this year is that the blockchain is an interesting technology."

Former JPMorgan Chase executive Blythe Masters, now CEO of Digital Asset Holdings, told CNBC earlier this month that the blockchain -- a public and transparent ledger of all bitcoin transactions -- had the potential to empower the financial world.

It could be applied to financial payment companies, for instance, according to Michael Treskow from venture capital firm Accel Partners.

Bitcoin sign
Reuters
Bitcoin sign

"It used to be that people thought that two years from now we were all going to paying with bitcoin and people were wondering what's going to happen with cash. Ultimately, what the focus is shifting to is the blockchain as an underlying technology," he told CNBC on Wednesday.

Meanwhile, research from the Bank of England has also stated that the technology could be applied in stock exchanges.

And the Bank of England isn't the only central bank with its eyes on bitcoin.

Elvira Nabiullina, governor of the Central Bank of Russia, told CNBC this week that the bank was monitoring bitcoin developments.

"We are watching over the development of this market and see that for consumers there are certain attractions in bitcoin's mobility, expediency, low cost," she told CNBC. "We will be watching with attention and, if necessary, (we will) regulate it."