What Is Behind The Notion That Bitcoin Is Useless?
Bitcoin is facing challenges that have made it to be useless. Learn the reasons behind this widespread notion.
Normally it is a fact that a tenth anniversary is a cause for celebration and reflection as there are hardly any encomiums forthcoming for Bitcoin that will soon celebrate the tenth anniversary of its introduction to the world. It was when Satoshi Nakamoto wrote a paper announcing Bitcoin as supposed to have created the digital currency in response to the financial crisis. Thereby decentralizing the financial ecosystem it was an attempt to shift the balance of power from a select group of financial institutions to the wider public.
Whereas the currency’s wide range of scandals and volatile price swings in the ensuing ten years have certainly obfuscated those intentions with the tenth year being particularly painful. It was then that its price has crashed since the start of this year and the coin has lost approximately 70% of the value in a prolonged swoon as the cryptocurrency markets are mostly following bitcoin’s lead that has also capsized in value falling by 73% during this period.
Considering the case as if that wasn’t bad enough it has certainly failed to gain mainstream popularity with people not using Bitcoin either for retail purchases or trading as it was peaking with transaction volumes on bitcoin’s blockchain have plummeted, with scandals plaguing Bitcoin and cryptocurrencies continuing apace. Thereby assessments of Bitcoin whether as a store of value or a medium for daily transactions there have been mostly negative. Whereas in a withering editorial, the Economist recently has declared that Bitcoin and other cryptocurrencies are useless. They further explain that there is no sensible way to reach any particular valuation. And points out several flaws in the ecosystem. It is thereby including the lack of transparency and security on their blockchain as well as difficulties in purchasing or transacting with cryptocurrencies.
Moving on further it has to be noted that the Economist is not the only publication critical of Bitcoin whereas other publications do have documented timelines and their assessments of Bitcoin’s rise in a similar vein. This fact does it mean that Bitcoin for all its stated noble intentions is useless?
The Case For Bitcoin As Useless Innovation
It is found that the greater the bitcoin’s identity crisis it is largely to blame for the current downturn in its fortunes as originally designed as an international currency and borderless mechanism for daily transactions.
Except It Didn’t Turn Out That Way.
Whereas over the years reports have documented its use in money laundering as well as illegal activities even as its clunky interface has ensured that consumer adoption remains negligible as the flipside to this story has been the entry of speculative retail investors driving up its price to unsustainable levels.
Thereby skyrocketing valuations in cryptocurrency markets, it has changed the dominant narrative surrounding Bitcoin with no longer considering a medium of daily transaction whereas instead the cryptocurrency is being branded as a store of value which is an alternative investment similar to gold. This is how the cryptocurrency faces two significant problems here as well.
The first problem is related to the bubbles in bitcoin’s price. Consequently, there have been three bubbles in Bitcoin occurring in 2011, 2013, and 2017 that is the parabolic curve with a sharp increase in valuation immediately followed by an equally precipitous decline. It was during each of these bubbles that bitcoin’s value rose by triple digits and attracted significant retail capital with thin liquidity volumes playing a major part in boosting bitcoin’s price in these bubbles.
Whereas the second problem relates to doing Bitcoin checking very few of these basic characteristics of a store of value. According to Morningstar analyst Kristoffer Inton, and his team, they created a framework to check whether cryptocurrencies could displace gold as an instrument of investment. Closely focused on liquidity, functional purpose, scarcity, future demand certainty as well as permanence. This is while except for scarcity of supply Bitcoin fails on the other attributes. This is not surprisingly the analysis concluded that cryptocurrencies do not and will not challenge gold as a safe-haven asset class.
A Brighter Future Ahead?
When taking into account the technological advancements holding out hope for the cryptocurrency use in retail transactions, there are the number of Lightning Network Nodes within bitcoin’s network multiplied. Those cross-chain swaps will surely enable seamless transactions with blockchain for other cryptocurrencies.
It is a fact that the Bitcoin ecosystem continues to grow with a suite of products that expand its range of use cases whereby in addition to trading with Bitcoin you can also use it as collateral for loans or buy jewelry with it. Thereby according to some reports, small and mid-sized businesses have begun using bitcoin’s blockchain to make wire transfers because it costs less.
Whereas it is observed that the biggest change in bitcoin’s fortunes is set to come from regulation as the rejection of Bitcoin ETFs by the SEC has grabbed headlines that have been a visible softening of regulators stance. While it is true that Bitcoin and other cryptocurrencies have become a prominent topic of discussion at Fintech conferences and amongst SEC commissioners.
Concluding The Topic Here
It is in this scenario that the result is that some order is beginning to emerge from the chaos of the Bitcoin ecosystem. Thus the formation of self-regulatory organizations for cryptocurrency exchanges is a start. Thereby the entry of insurance giants such as Lloyds of London into the cryptocurrency ecosystem is surely another development that will assuage the concerns of the investors that are otherwise wary of investing in cryptocurrencies. Whereas a slew of the new investment products from index funds to retirement accounts is making way into the ecosystem.