Government Control and The Need for Bitcoin
The recent volatility of Bitcoin's price can be attributed to several factors - the annual price dip that happens around China's Lunar New Year (and has happened each of the past 3 years)
Each year for the past 3 years, there has been an average 20% price drop followed by a progression back within approximately 30 days. But this year's correction has has seen a bigger than usual drop in the price and much of the drop has been attributed to the recent efforts by governments in China, South Korea and India to crackdown and attempt to control the Bitcoin environment.
Problems Persist Globally
While governments struggle to gain visibility and control, the underlying problems with their government controlled financial systems rage on. In Venezuela, the Bolivar which country's currency, is nearly worthless because the government has artificially inflated it's value so much. It has lost 98% of it's value in less than 1 year, making everyday menial transactions nearly impossible to manage.
Similarly in Zimbabwe, the government has taken an even more extreme step in controlling inflation and deflation and has decided to restrict people's access to their own money. Citizens and companies alike have to submit requests for release of their funds, approved on a weekly basis by a government appointed committee. [source: Bloomberg]
There are countless other recent examples, including in the United States and Europe, where the government manipulates the value of currency to serve an agenda (usually driven from central banks) and the people are left to hold the bag on the outcome - most often one that devalues their money, autonomy, or purchase power. And in extreme cases like Venezuela and Zimbabwe, can cause entire economic collapse of a region.
Even the US dollar, which is the global standard, is not back by anything except the Unites States government. There is no underlying asset or commodity like gold or oil backing the US dollar. The American Economy is the only thing propping up the dollar. Even though the US economy is one of the greatest in the world, it too has it's faults. Only 3 days ago, the United states Government shut down almost all functions of operations. The one and only thing backing the standard global currency shut down! This is the biggest evidence for the need for a global currency backed by the people...one that doesn't rely on any one government. Normally when there is instability like this the smart money invests in gold, because of its nature as a store of value in and of itself, without requiring a backing asset. The problem with gold, which bitcoin solves, is that gold can not be easily used as an everyday currency to buy goods and services. Bitcoin is the new digital gold in that it is a store of value but it is also far superior to gold in that it can conveniently be used as a daily transaction currency. The evidence is clear when clearly being seen that way around the world by the huge price spike of bitcoin , not gold which remained flat, when the US government shut down at midnight on Friday.