Why Bitcoin Will Fail
October 28 2021 - 6:30AM
Finscreener.org
When Bitcoin started its journey
towards financial triumph, the price of a single BTC was less than
a single penny. Barely a decade after its launch, Bitcoin rose from
its humble beginnings to reach a
market cap of 1 trillion US dollars. The rising price of the asset turned some of
its fiercest critics to reconsider their beliefs about the digital
currency, given the throngs of people and industry leaders that
were enchanted by Bitcoin, which changed the world of finance. On
the other hand, there remain others who think that Bitcoin is
nothing more than a speculative asset bubble that is destined to
pop, leaving people empty-handed once the dream of digital gold
fades away.
If you are interested in Bitcoin
as an asset, you deserve to know both sides of the Bitcoin story.
The internet is full of enthusiastic supporters and grim
soothsayers when it comes to Bitcoin, but it is best that you form
your own opinion and make a judgement based on clear facts and
accurate information rather than sentiment.
The Case Against Bitcoin
We will look at some of the main
arguments that conclude that Bitcoin is destined to fail. There are
three main arguments that come to the forefront in the case against
Bitcoin. Let’s go over them one by one.
Bitcoin Has No Real Value Unlike Fiat
Currencies
Fiat money, such as USD or EUR,
are legal tender and they are backed by national and supranational
states. Their purchasing power is guaranteed by the authorities
that issue the currency and they are backed by the entire economic
systems these authorities manage.
Bitcoin, on the other hand, isn’t
backed by any central organization. It has value only because
people give it value and its price is largely tied to public
sentiment. Once the public interest in Bitcoin wanes, so will its
price, bringing down the digital currency to nothing.
Bitcoin Is Too Volatile to Have Store of
Value
The second argument against
Bitcoin is that the digital currency is too volatile to work as a
reliable currency. Bitcoin prices regularly dip and soar, making it
impossible to predict whether it will be worth tomorrow what it is
worth today. You might
pay 10,000 BTC to buy a
pizza today but if the
Bitcoin prices triple next week, the whole experience can leave a
bad taste in your mouth. If the prices dip instead, vendors that
accept Bitcoin could witness the total erosion of their profits and
capital.
Bitcoin Can’t Compete With Fiat
Currencies
Finally, Bitcoin critics rail
against the idea that Bitcoin can replace national currencies as an
international payment system. Stability and health of national and
supranational economies depend on the decisions of these
organizations and their monetary policies. Bitcoin isn’t ruled by
an elected or otherwise controlling party. You can’t print more
bitcoins when the economy is failing, nor can you increase its
value by other interventions that are necessary for a functioning
economy. No country would give up its power over their currency to
a system that isn’t directly manageable.
Why Bitcoin Will Not Fail
The case against Bitcoin is a
tough one, built with sound facts. Bitcoin doesn’t have intrinsic
value, it is a volatile asset, and it is hard to imagine the world
governments giving up control over their currencies and economies.
That said, it is also possible to make a strong case for Bitcoin.
Let’s see why many people think Bitcoin will triumph in the long
run.
Bitcoin Is Digital Gold
You might have heard people refer
to Bitcoin as digital gold before but did you know that this isn’t
just a metaphor? The case against Bitcoin rests on the assumption
that Bitcoin can’t compete with fiat money as a payment system in
the long term. However, most Bitcoin supporters don’t consider the
currency as a payment method but they actually consider it as an
asset with a
store of value similar to
gold. After all, gold
doesn’t really have intrinsic value, but it is the most preferred
and stable asset choice for storing value for a long time. Gold is
scarce, which makes it valuable, and people believe in the value of
gold, which makes it durable.
Bitcoin enthusiasts reason that
Bitcoin can replace gold in the long run, or become a gold-like
asset for storing value long term. While price volatility seems to
play against that dream, in reality Bitcoin prices rose steadily
throughout the years. Industry wide global adoption increases with
companies like Tesla (NASDAQ: TSLA), PayPal (NASDAQ:
PYPL), Amazon
(NASDAQ:
AMZN), Microsoft
(NASDAQ: MSFT)
and Walmart (NYSE: WMT) paving the way. For Bitcoin supporters the
question isn’t whether Bitcoin will stabilize, but how much it will
be worth once it reaches its peak and stabilizes. Price predictions
are anywhere between $100,000$ and millions of dollars.
A Few Words Before You Go…
Bitcoin is a volatile
asset and its speculative
nature has caused much friction between critics and supporters of
the cryptocurrency. While critics think volatility shows how much
Bitcoin is likely to fail, for others it is just the growing pains
until the digital asset reaches its crowning point. As you saw
above, the argument against Bitcoin rests on the idea that Bitcoin
seeks to replace currencies, but to enthusiasts, it is clear that
there is gold at the end of the rainbow.
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