Bitcoin price has experienced a dramatic surge last week from a range from $225 to $227 and shoot well over $250 before making a correction this week and now hovers around the $244 to $245 range.
While it was surprising as far as the market is concerned, it was a welcome development nonetheless for those who have investments in Bitcoin, because it obviously further raised the value of their existing investment on the cryptocurrency.
Market analysts however attribute the sudden surge in the Bitcoin price to the continuing downward spiral of the economy of Greece, which is a member of the European Union (EU).
The Greece debacle
Greece has been experiencing economic slowdown since 2008 and despite infusing the 110 billion Euro bailout package provided by the Troika composed of the International Monetary Fund, the European Central Bank and the Eurozone countries, the Greek government still failed to implement all the reforms as part of the conditions of the bailout agreement and the country’s economy continued its plunge, details NewsBTC.
The bailout package required that the Greek government implement austerity measures, make structural reforms and privatize government assets. But the austerity measures implemented by the government caused more problems among citizens than improving the economy leading to widespread discontentment among Greeks.
The country received two more bailout packages since then until the new Syriza Party won the election and promise to deliver Greece from debt and removed the austerity measures that were previously put in place by the past administration.
There are speculations before that because of its worsening economy; Greece would likely exit the EU as early as 2012.
Greece is now in a stalemate with Troika regarding debt repayment for the first bailout package as the country wants a good part of it already written off in addition to asking for the release of the remaining funds from the previous bailout package which is still frozen due to Greece’s non-compliance to the terms of the agreement requiring implementation of reforms.
The country is now in the brink of sovereign default with eroding liquidity. And if the situation continues, Greece will run out of Euros to pay the employees of the state with their salaries and other social benefits.
If the situation continues, Greece will have no choice but to drop the use of the Euros and have its own currency again, which is expected to be very much lower than the Euros. The continuing slump may further deteriorate the nation’s liquidity and result to the collapse of banks.
Going to Bitcoin as option
As the Greeks began to panic, they started withdrawing money from their bank accounts to rescue their savings and pre-empt the expected collapse of banks with the further deterioration of their country’s economy. To preserve their wealth, they decided to invest in two of the most valuable assets in the world at the moment which are gold and Bitcoin.
But much of them have chosen Bitcoin over gold and thus resulting to the increased demand for Bitcoin that eventually led to the increase in the Bitcoin price last week.