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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