Is Bitcoin A Useless Cryptocurrency?

A 10-year anniversary is a very important moment for any person or project. But in the case of Bitcoin, there wasn’t much to celebrate in 2018.

This was an important milestone for the leading cryptocurrency, which was passing 10 years of existence since Satoshi Nakamoto presented to the world his idea for a decentralized cryptocurrency as a response to the financial crisis created by states and banks.

However, after 2017 where we saw such an impressive price increase that took Bitcoin to be worth $20,000, 2018 was marked by a bearish period where its value dropped to the $5,000 zone.

Instead of being a period of celebration for the community, it became one of transition. The headlines reflected the fall of the price instead of the benefits of this cryptocurrency.

Thus, instead of prioritizing Nakamoto’s idea of an uncontrolled and decentralized financial system that takes power away from financial institutions and offers it to society, we were facing a moment of uncertainty.

Understanding Bitcoin

The years 2018 and 2019 were ones that investors would rather forget. And not just for Bitcoin, but for the entire cryptocurrency ecosystem that suffered during these 2 years.

When 2018 started, Bitcoin could be bought and sold for an amount close to $18,000. But just over a year later this dropped to $3,400, in June 2019, a loss in value of 3/4 of that first price.

The rest of the market did too, by a similar proportion, losing about 73% of the price it enjoyed in its heyday.

Although that is past history, Bitcoin has enjoyed more than a significant increase in value during 2020 and 2021. Thanks in part, to the interest of companies and CEOs.

So we have Jack Dorsey, the founder, and CEO of Twitter, also Paul Tudor Jones, the founder of a hedge fund, and investor Bill Miller. All supporting in the last time the main cryptocurrency.

Also, during this period, we could see how the giant of electronic payments, PayPal, gave the go-ahead to Bitcoin and other cryptos, allowing buying and selling on its platform to these.

Finally, there came one of the big events that catapulted the price of Bitcoin to $60,000. This was the fact that Tesla decided to use part of its liquid capital to buy $1.5 billion BTC in January 2021. A more than a significant show of support.

Even so, there is still the discussion of whether Bitcoin will eventually transform into a currency used by everyone. This both in terms of solution as a safe haven of value, but also as a medium of exchange.

During 2018 it was very easy to attack cryptocurrencies, which had seen their value deflate. The London-based newspaper, The Economist, published an editorial in that period calling Bitcoin and cryptocurrencies unused currencies:

There is no sensible way to arrive at a concrete valuation.

Within the publication, we found the reasons why it was a system with huge flaws, among which included the lack of transparency and security in the blockchain, as well as the difficulties to make transactions on a day-to-day basis.

Although this media outlet was not alone in criticizing Bitcoin, The Wall Street Journal and other investors called it a bubble about to burst.

Mark Cuban, for example, drew a parallel between Bitcoin and gambling and suggested that investors prepare for a total collapse in its price because the market for it was so volatile.

Arguments that Bitcoin is useless

One of the main problems with Bitcoin today is its volatility. It was intended to be an international currency that people can use in their daily transactions and that can be sent across borders in a short time. But unfortunately, this was not the result.

Over the years we have seen how some bad actors within this ecosystem echoed, showing how this cryptocurrency was used for money laundering and other illicit activities.

At the same time, we have witnessed the increase of its adoption, being financial institutions and important figures in the markets the ones that finally led this sector to grow again.

This new increase in its price made Bitcoin’s commissions grow so much that it is no longer considered a means of payment, as it could be the purchase of a coffee. Instead, it has become a refuge of value, a place where investors can rest assured that in the long term their money will increase in value. Something similar to what happens with gold.

Although there are two serious problems that this cryptocurrency must face:

The first one has to do with the price. During its short existence, we have seen how its price has grown out of all proportion and then burst like a bubble. But it is not correct to call it as such since to be one it should have disappeared and this is not what happened so far.

We have had such situations in 2011, 2013, and 2017. During all these instances the share price has climbed to valuations as incredible as their subsequent declines were.

Although it has been precisely these moments in its history where more interest has been placed in it, attracting more people and institutions to the ecosystem. It has also been its enormous liquidity that has allowed its price to move with such agility, both up and down.

The second problem has to do with possessing some value haven characteristics. An analyst at the firm Morninstar, Kristoffer Inton, and his team have created a way to analyze whether cryptocurrencies could replace gold.

This analysis focuses on liquidity, functionality, scarcity, future demand, and permanence. According to this study, except for scarcity, Bitcoin fails in the other attributes. Therefore, the conclusion reached by this team is that BTC will not replace gold as an asset to protect your money.

Agreeing or disagreeing with this analysis is a matter of another time. But in the end, with Bitcoin, it is business as usual, as it is an asset that divides the waters between those who believe in it and those who do not. Thus we find people who say that we are facing a scam and then there are those who defend it and bet on it.

The future of Bitcoin

For those who see a promising future in Bitcoin, the developments of the last few years are very important points when thinking about a future where Bitcoin becomes more important.

Technological developments, both inside and outside its blockchain, could mean that small transactions become a reality, as is the case with the lightning network.

The nodes of this network have only grown, allowing people to make Bitcoin transactions outside the blockchain but without the fees and with virtually instantaneous speed.

The Bitcoin ecosystem is also constantly growing, allowing larger transactions such as the purchase of jewelry or a home. There are also platforms that lend money, which in return offer a return to the people who provide the capital.

There are even small and medium-sized companies that have seen that with Bitcoin they can make payments to suppliers avoiding the problems that banking systems present.

Although one of the community’s greatest hopes is placed on the relaxation of regulations. A case in point is the long-awaited Bitcoin ETF and its approval by the US financial regulator, the SEC.

The interesting thing is that the pandemic that hit the world during 2020 has set off alarms as to whether the fiscal stimulus will end up generating a global hyperinflation problem, something that was thought to be extinct in developing countries.

This is where Bitcoin comes in, and with great force, as it can be an interesting alternative to protect yourself. Precisely from the uncontrolled issuance that has been experienced during this period of uncertainty.

Just as the 2008 crisis has been the kick-off for Bitcoin, the following global economic crises could be the starting point for its adoption.

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