Here’s what should bolster bitcoin in 2014
Last year was nothing short of exciting for bitcoin and with 2014 set to be another interesting year for digital currencies, the Bitcoin Foundation expects wider adoption and the recognition of its potential to support bitcoin going forward.
Over the course of 2013 the digital currency increased nearly 6,000 percent in value on the Mt. Gox exchange, closing the year out at $806.
In late November, bitcoin peaked at $1,242 before concerns about Chinese regulation and a global speculative bubble led to a rapid depreciation. Bitcoin has since stabilized around current levels. Bitcoin was trading at $816 on the Mt Gox exchange on Tuesday afternoon in Asia.
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As mainstream awareness continues to increase the question remains: given volatility and speculation can bitcoin become a viable currency?
"There's certainly a lot of work that needs to happen… between now and bitcoin being a unit of account unto itself," Patrick Murck, principal and founder of the Bitcoin Foundation, which aims to standardize, protect and promote the use of bitcoin worldwide, told CNBC on Thursday.
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"But people are working on it and I think that's what you're going to see happen this year. Having reliable exchanges… more merchants coming on board, more consumers using it as a payment platform. All of those things will support bitcoin going forward as a currency," he added.
Among the key events for bitcoin in 2013 were a surprisingly positive U.S. senate hearing on digital currencies in November and regulatory action from Chinese authorities in December.
Despite the positive developments in the U.S., concerns about greater global regulation continue to linger after the People's Bank of China ordered third-party payment providers to stop using bitcoin in December, sparking a sharp fall in the value of bitcoin.
However, Murck expects such concerns to fade.
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"It's the same story that you saw play out in the U.S. At first people don't recognize bitcoin at all, they don't know what it is. They first take a look at it [and] it's very disruptive so it looks scary. So they want to tap the breaks a little bit and see what this thing is," he said.
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"As they start to get their heads around it and understand the real potential for economic growth, for job growth, for connecting people to a globally connected digital economy, they start seeing why as a policy objective they should be supporting innovation in this space. So I think you'll see the same thing in China," he added.
As for what 2014 holds for the underlying value of bitcoin, Murck said it all comes down how useful bitcoin is.
"I think the underlying value is going to be determined by how useful it is to people in commerce. So the more merchants that adopt it, the more consumers use it, the more businesses use it for supply chain management and for business-to-business transactions and cross-border transactions, the more valuable bitcoin will be to everybody and that will be reflected in the price."
— By CNBC's John Phillips. Follow him on Twitter