Bitcoin Unstable and Useless: Here’s Why (BTC-USD)

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Bitcoin (BTC-USD) was supposed to revolutionize the world of finance and the way we use currency. It has been promised as a safer, anonymized, efficient blockchain payment for the modern world, among other cryptocurrencies. In reality, Bitcoin almost never delivered any of its supposed purposes/benefits face more competitors than ever before and lack any intrinsic value to support its value.

lack of determination

Bitcoin’s price chart over the last five years shows huge fluctuations in price.

Bitcoin Five Year Chart

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This level of price volatility prevents it from being used as a base currency in any economy. If you think inflation is bad, imagine the price fluctuations that would occur if Bitcoin was used everywhere in our economy. The fact that Bitcoin is an unaffiliated, unsupported, digital currency means that it is traded as a purely speculative investment vehicle and changes only on sentiment rather than any basis. Therefore, it cannot be stable enough to see real long-term adoption as a currency. And if it does, it will have to change to such an extent that it no longer has any advantage as an investment.

Anonymized and Untrackable? I do not think so

Several high-profile seizures over the past few years have proven beyond any doubt that Bitcoin is highly traceable thanks to its public ledgers. As a result, the IRS is taxing crypto and various governments are seizing it with increasing frequency. This is not limited to Bitcoin, Ethereum (ETH-USD) and other cryptocurrencies are also susceptible to seizures and asset freezes. One of the perceived benefits of Bitcoin, according to many, was the possibility for people living under oppressive regimes to transfer money and trade without the authority of the state. But as we saw recently in Belarus, the ability to take over Bitcoin is very real. The truth is, Bitcoin’s claim to anonymity is dwindling by the day as agencies around the world learn to attribute transactions to individuals and continue to devote resources to their efforts to do so.

Uncertain Regulatory Future

The regulatory environment for cryptocurrency becomes more uncertain as various countries present their proposals to attract and tax and control the industry. Calls for regulation of crypto in the United States have strengthened following the TerraUSD crash (the company has since relaunched LUNA2-USD). Kevin O’Leary expects regulations to come after November midterms and US Congress fifty crypto related bills this year.

In the UK, the opening of Parliament promised to pass a law to give the government “the powers to seize and repurchase crypto assets more quickly and easily”. This comes alongside a regulatory framework (and possibly NFT issued by the UK government) aimed at facilitating the growth of the crypto industry in the UK.

With so many new regulations pending on the horizon, there is a huge unknown that could hurt the sentiment surrounding Bitcoin.

Plenty of Non-Crypto Alternatives to Digital Currency

The other problem I foresee for Bitcoin and other cryptocurrencies is that there are too many competitors with more usability. While Bitcoin can be adopted by retailers (or only Honduras) here and there, other types of digital cash are becoming available on a larger scale and are used as easily as a credit card. Apple Cash, Venmo, and other services let you easily send and receive money, as well as spend on a variety of services. Countries are also launching digital versions of fiat currencies, such as the Digital Yuan in the People’s Republic of China. According to Seeking Alpha’s article on the Digital Yuan, when Bitcoin itself is already traceable and competition is inevitable, it has numerous advantages, although the two disadvantages listed (lack of anonymity and competition with Alibaba) are not significant.

Solution

Bitcoin has received a lot of praise and hate since its inception, but underneath all the noise, the cryptocurrency doesn’t have much to offer. It is too unstable to serve as a real currency (plus you are taxed on its fluctuations). The promise of anonymity has proven false as governments pour money into tools that allow them to take over crypto. The regulatory landscape is about to change as countries get serious about regulating crypto. And finally, it has no unique benefit in most use cases: There are many other ways to perform digital transactions, often easier and more efficient. As a result, Bitcoin is neither attractive as an investment nor as a currency.

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