The hype about bitcoin and other cryptocurrencies is all down to an age-old human desire, says German business journalist Bernd Kramer in his essay for finews.first.


finews.first is a forum for renowned authors specialized on economic and financial topics. The texts are published in both German and English. The publishers of finews.com are responsible for the selection.


Former U.S. Federal Reserve Chairman Paul Volcker came to a clear conclusion: the ATM machine was the only financial innovation which had brought something to humanity in recent times. With this jibe, the central banker who successfully had reigned in U.S. inflation, aimed at new financial instruments such as mortgage-backed securities. For a long time, they had proved popular on capital markets. The proponents believed that such papers helped spread the risks of a mortgage default among investors in an acceptable manner.

Critics, including Volcker, branded the instruments the devil’s work, which had brought the financial system to its knees in 2007/2008.

Today, economists are at it again, arguing about whether a new product will revolutionize the world of money or make the financial market more vulnerable. The new development is called cryptocurrencies. Bitcoin, the most popular, has seen its price explode. The value of a bitcoin jumped from $1,000 to $20,000 in 2017.

«This makes bitcoin attractive for people who have no time for the authority of the state»

These are increases that catch people’s imagination. Still, bitcoin is hard to understand. Put in a simple way, they are a means of payment generated by a computer network, which is very secure against forgery due to the transparency and sophisticated encryption.

Also, there will only ever be a set number of bitcoins. There are no borders for the cryptocurrency. The coins can be used anywhere as long as they are being accepted. They gain in value through the trust of those who buy them. The owners of bitcoins believe that they will gain in value and replace currencies such as the euro. There is no central authority behind bitcoin. Responsibility lies with an online community, similar to the one behind Wikipedia.

This makes bitcoin attractive for people who have no time for the authority of the state. People who mistrust monetary policy of central banks and hold them responsible for sparking economic crises through an allegedly excessive money supply also take a liking.

«What makes the central-bank-sceptic happy is a cause of worry for Joe Blogg»

However, only a few have so far taken to bitcoin as a means of payment. A number of trendy shops may accept the cryptocurrency for bill payments but this is in no way a mass phenomenon. And that’s not without reason: bitcoin payments are expensive. According to «Sueddeutsche Zeitung», each transaction costs as much as 20 euros in fees because the control of payment takes so much processing capacity.

Also, the exchange rate of bitcoin with traditional currencies may vary greatly. This renders pricing in bitcoin difficult. And what makes the central-bank-sceptic happy is a cause of worry for Joe Blogg. The traditional currencies are backed up by countries with all their powers and economies. Which also serves as a way of creating trust.

«Nobody wants to miss the train to quick riches»

Hence, it is unlikely that bitcoin will soon replace the euro. It is exaggerated on the other hand to call cryptocurrencies a huge risk. They become a danger once their purchase is being financed through borrowing. Excessive debt triggers financial crises – not the new financial instruments. Cryptocurrencies however ought to be submitted to legal controls as any other means of payment.

The bitcoin hype is down to an old human urge. U.S. economist Charles Kindleberger said: «There is nothing so disturbing to one's well-being and judgement as to see a friend get rich.» And because nobody wants to miss the train to quick riches, there are many trying to buy bitcoin. Whether or not this makes sense is an entirely different matter.


Bernd Kramer is an economist and long-time business journalist with «Badische Zeitung» (BZ) in Freiburg im Breisgau, Germany. He started writing his first contributions for the local section of BZ during his school years. Having completed studies in political science and economics in Heidelberg and Glasgow, Kramer did an internship at the newspaper. After a three-month stint as a sports journalist at «Der Sonntag in Freiburg» he joined the business section at BZ in 1999.


Previous contributions: Rudi Bogni, Peter Kurer, Oliver Berger, Rolf Banz, Dieter Ruloff, Samuel Gerber, Werner Vogt, Walter Wittmann, Alfred Mettler, Peter Hody, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Andreas Britt, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Peter Hody, Albert Steck, Andreas Britt, Martin Dahinden, Thomas Fedier, Alfred MettlerBrigitte Strebel, Peter Hody, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Claude BaumannAnton AffentrangerYves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Didier Saint-Georges, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino BoriniBert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. RutschDorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob RothMarco Martinelli, Beat Wittmann, Thomas SutterTom KingWerner Peyer, Thomas Kupfer, Peter KurerArturo BrisMichel LonghiniFrederic PappClaudia KraazJames SymePeter Hody, Claude Baumann and Dennis Larsen.