Could Russian money from Cyprus be fuelling the Bitcoin?

In the last 6 months the value of the “virtual” currency the Bitcoin has jumped from $9.7 to $149. It started increasing significantly in February and really  took off in the middle of March this year. It seems too much of a coincidence that the worries (and the rumours) about the Cyprus banks followed the same time-table.

Bitcoin value in US Dollars

Bitcoin value in US Dollars

It is thought that much of the Russian money stashed away in Cyprus – especially the “black” money – left Cyprus before all the restrictions came into effect. That money must have gone somewhere and that somewhere would need not only to be “remote” but which also could provide the possibility of some “laundering” when the money was moved again. The Bitcoin perhaps could provide such a haven. If the bubble bursts in the next few months it could well indicate that the Russian money has moved again, well “laundered” and probably at a profit.

The bitcoin logo

At current values the Bitcoin “hoard” – restricted to be 21 million Bitcoins – represents a little over $3 billion.

The Telegraph reports that

Russia is the country most interested in Bitcoin, internet searches show, after a week in which the controversial electronic currency reached a record high and led to talk of a bubble.

The virtual currency, which allows users to circumvent the banks, burst into the mainstream as the price of a Bitcoin rose to $147 (£96) against the dollar, from under $20 at the start of this year.

Russia is the country now performing the most internet searches for the term “Bitcoin”, according to Google figures, followed by Estonia, the United States and Finland. The UK is not in the top 10.

The data gave weight to the belief that the recent price spike was driven by the crisis in Cyprus, as cuts to depositors’ savings planned under its bail-out further undermined faith in the global banking system.

Russian businesses were thought to account for €19bn of deposits held in Cypriot banks as of September last year, due to tax advantages, cultural links and, in some cases, for reasons of tax evasion. …….

……….. Created by a developer using a psuedonym in 2009, Bitcoin was intended to offer a means of payment that cuts out the banks through a “purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”.

The coins are “mined” by computer processing, with the system capping the number that can be produced at 21m. The process is technically difficult, meaning it has a cost in terms of equipment and electricity.

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2 Responses to “Could Russian money from Cyprus be fuelling the Bitcoin?”

  1. Bitcoin still soaring | The k2p blog Says:

    […] my previous post, the Bitcoin value  continues to soar and had reached about $240 today. The Bitcoin hoard of 21 […]

  2. Wild ride for the Bitcoin as its value crashes | The k2p blog Says:

    […] wonder whether the real reasons for the Bitcoin gyrations ( see previous posts here and here) will ever be fully known. From $ to about $240 and now back to […]

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