Bitcoin’s price boomed again this month from $6,962.6 to $7,720.27 in less than one hour. The best fact is that this is the fastest increase to date! Like anything crypto rumour was rife but the most credible reason seems to be the association with an Islamic scholar deeming cryptocurrency compliant with Islamic Sharia law. Islam is the fastest growing religion, with over 1.6 billion people worldwide.
It’s vital to note this importance because currency without intrinsic value is forbidden to Muslims, as is lending money with high-interest rates, formally known as usury.
Bitcoin has been on a downtrend and trading bearishly. The price of bitcoin can often be swayed by positive or negative news in the cryptocurrency space but the correlation between the release of the news and latest study must have had some influence in the recent rise as it was nearly at the exact moment of release to the media.
“Many speculated that the sentiment around bitcoin was getting more positive, and that it may have been related to Sharia law compliance,”
Olga Feldmeier, CEO of fintech startup Smart Valor. She continued:
“Others assumed there was unwinding of a large short-selling position. I personally think that this rise was due to a large institutional investor.”
The study, by Muhammad Abu-Bakar of Blossom Finance in Indonesia, explored the functionality of bitcoin and other cryptocurrencies to determine whether they fit with Islam’s strict definitions of money.
“Several recent fatwah issued by prominent Muslim scholars offered incomplete or contradictory opinions on the topic,”
said Matthew Martin, CEO of Blossom Finance.
“With all the confusion out there, we wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance.”
The study’s author points to the fact that bitcoin is recognised as a legal currency in Germany and therefore qualifies as Islamic money in that country.
“Bitcoin is permissible in principle as bitcoin is treated as valuable by market price on global exchanges and it is accepted for payment at a wide variety of merchants,”
the study states.
“Moreover, many private individuals accept bitcoin as a medium of exchange in their private transactions.”
The Sharia Law prohibits ‘usury’, the practice of lending money at high interest rates. As Bitcoin trading is volatile and involves huge profit and loss, there have been several debates in the Islamic Scholar community as to whether Bitcoin trading is permissible or not. Twitter was at its usual divided but hilarious self:
One positive Twitter user defiantly said: “The revolution is here… the bull is pawing with its forefoot, getting ready for the takeoff.”
Another Twitter user contradicted this with:
“But it will take more than 1 scholar to cause 1.8 billion Muslims to participate in it. Example, there’s a debate between two sides of important scholars about alcohol for centuries. One says it’s okay. One says it’s a big no-no. Similar concept.”
It’s a fair comment.
What does this mean going forward?
In terms of mass adoption and acceptance, its massive. Muslims account for nearly one-quarter of the earth’s population. If at least approved by more Islamic scholars on a religious level making it morally acceptable the decision could remove the stigma and open the market to many new investors previously avoiding the commodity.
Despite a choppy 2018, Bitcoin is here to stay as it continues to be the US Dollar of the crypto world. It’s important to note that as usual, many of the lesser tokens and coins rose at a similar rate as Bitcoin. A harsh reality is that the success of the asset class is pegged to Bitcoin. This said, with the Muslim world’s adoption of the crypto revolution is another step in the right direction towards mainstream adoption.