How Useful Is Bitcoin?
The 10th anniversary is ordinarily a reason to reflect and celebrate. However, Bitcoin had few accolades to celebrate on its first anniversary. This cryptocurrency marked the tenth year since its inception by Satoshi Nakamoto. Some people argue that digital currency should have been competing with fiat money at this time in response to the world's financial crisis.
Nakamoto wanted to create a decentralized currency or financial ecosystem. But has his attempt to shift power balance from financial institutions and government to the public been effective?
Bitcoin and other cryptocurrencies had tumultuous years in 2018 and 2019. Bitcoin traded at a high price of $18,336 in early 2018. However, the cost of this cryptocurrency dropped to $3,400 by the June of the following year. And this marked almost three-quarters loss of this cryptocurrency's value. Other cryptocurrencies follow Bitcoin's lead. Consequently, the market's value capsized in the same year, declining by around 73%.
However, the price of this cryptocurrency picked steam again. And this prompted investors to jump onto the bandwagon again. Also, PayPal announced the plan to accept Bitcoin on their platform. Such information led to the increase of Bitcoin's price. As of April 2021, Bitcoin price exceeded the $60,000 mark.
Whether the cryptocurrency will eventually go mainstream or not as value storage or daily transaction medium remains a discussion topic. But some people have considered cryptocurrencies like Bitcoin a useless innovation. According to them, the cryptocurrency ecosystem has several flaws: the lack of security and transparency on the blockchain. Difficulties in transacting or buying cryptocurrency are also another challenge.
Although people can buy Bitcoin in crypto exchanges like the BitcoinPrime app, nobody regulates the price. That's why the price of this cryptocurrency has remained volatile. Some people have even likened this cryptocurrency to gambling. Others suggest preparation for a significant crash for crypto investors due to Bitcoin's price volatility.
Why Bitcoin Could Be a Useless Innovation
The identity crisis of Bitcoin is essentially the cause of its volatility. Originally, Satoshi Nakamoto designed Bitcoin as daily transactions mechanism and an international currency that people could seamlessly use across borders. However, that's not how Bitcoin works.
Over the years, some people have used Bitcoin in illegal activities like money laundering. What's more, consumer adoption for Bitcoin is still minimal. Speculative investors' entry into the industry is the flipside of this cryptocurrency's story. These have pushed the cryptocurrency's price higher.
The crypto market's skyrocketing valuations have changed the narrative dominant of Bitcoin. Today, people don't see Bitcoin as a daily transactions' medium. Instead, they see it as a value storage. Others consider it an alternative investment like gold. However, this cryptocurrency faces significant problems.
A significant challenge facing Bitcoin is the bubble in its price. Bitcoin has experienced several price bubbles, and experts are unsure whether it will uphold its record-high price. In 2021, Bitcoin experienced a price bubble. Two other drops followed this in 2013 and 2017. With every instance, this cryptocurrency has experienced a parabolic curve. With this curve, the value of the cryptocurrency has increased sharply, followed by a steep decline.
Bitcoin's price value tripped with every bubble, attracting significant capital from retail investors. Thin volumes in liquidity enhanced the price of this cryptocurrency during the drops.
Another problem is about Bitcoin's characteristics as a value storage. Some people are skeptical whether Bitcoin can displace gold. Apart from scarcity, Bitcoin has the other attributes of an investment instrument.
Enthusiasts are optimistic that Bitcoin will be a powerful virtual currency. Technological advancement could lead to the use of Bitcoin for retail transactions. More people are using Bitcoin, and the usefulness of blockchain technology is increasing.
As more people embrace Bitcoin, its popularity and uses will increase. And this could make Bitcoin a strong cryptocurrency moving forward.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes