These days, whether or not you’ve actually bought any, you’ve at least heard of bitcoin. The first “ cryptocurrency”, bitcoin was introduced in 2009 and enjoys far more notoriety than its counterparts Etherum, Litecoin, and Cardano et.al.
For the uninitiated, however, bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain. The currency has no physical manifestation; it simply exists as balances in a public ledger. If you’re considering investing in it, you’re probably wondering if bitcoin is headed for a fall.
Well, let’s take a look.
Arguments Against Bitcoin
Writing for Bills.com, Daniel Cohen cites several reasons why Bitcoin will fail such as having unstable values, dependent upon less than solid exchanges, a favorite of the iniquitous and difficult to secure. His article, “Is Bitcoin Headed Toward Failure?” establishes these issues as potentially overwhelming for Bitcoin exchanges.
Bitcoin is Easily Lost
Take, for example, the case of James Howells, a British software engineer who accidentally threw away a hard drive containing some $280,000,000 in the currency. Given the money only exists on that drive, he has no recourse should he fail to find it.
Other such tales include that of Stefan Thomas of San Francisco who forgot the password to his drive on which $250,000,000 worth of the currency is stored. Reports are that he’s down to two tries before the drive locks him out forever.
Exchange Failure/Security Issues
At one point, the Japan-based bitcoin exchange Mt. Gox is reputed to have handled some 75 percent of all worldwide transactions. The organization went bankrupt in 2014 after hackers made off with $460,000,000 in cryptocurrency.
Oh, by the way, that was the second time the exchange had been hacked. The first incident saw $8.75 million disappear in June of 2011, according to Wired.com.Far from an isolated example, other bitcoin exchanges have been hacked in the past as well.
Price Volatility
Of all the posited reasons why Bitcoin will fail, the most likely is the unpredictability of its value. Government-supported currencies have the power of the world’s economic infrastructure to ensure their values are supported at a certain level. Meanwhile, cryptocurrency is buoyed only by the confidence of its investors. Bitcoin values have gone from $13 to $1,100 to $500 — in a single year. This makes it an extremely risky investment.
Favored by the Unscrupulous
A number of illicit online marketplaces treat bitcoin as their currency of choice. In response, a number of international anti-money-laundering initiatives have been launched as bitcoin becomes more commonplace.
Still, according to a report at Bloomberg.com, Even as the finance world has embraced cryptocurrencies and pumped up their prices, they’ve struggled to shake their reputation as a tool allowing thieves and drug dealers to hide illegal transactions.”
Despite the fact, that according to the Chainalysis 2021 Crypto Crime Report less than 1% of crypto transactions were for illicit purposes. One U.S. Congressional Representative floated the notion of barring bitcoin’s use by Americans. Although it might be difficult to enforce, if that idea gains traction, bitcoin’s future could become precarious as cautious investors fear losing their investment.
Should You Invest?
Every venture entails a certain degree of risk. Thus, one must compare the potential reward against the level of risk involved before making an investment decision. Unlike futures trading, bitcoin experts assure you that you can never lose more than your initial investment, however, losing your entire investment is still not a happy prospect.
So, is bitcoin headed toward failure?
The answer to that question is anybody’s guess at this point. However, the currency does have a lot of negatives weighing it down, even as investing in it gains more and more steam.
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- Ripple the Cryptocurrency of Banks
