t this point everybody is talking about Bitcoin as it has soared in value 10-fold over the last year, now crossed 11000 USD. There is definitely a hype around cryptocurrencies, Bitcoin being the center of attention. Everybody wants to be part of this adventure it seems, or the FOMO emotions are taking over people’s brains. FOMO, fear of missing out. Bitcoin just keeps going up and the million Dollar question is of course how long time will this continue. Should I jump on the train and make some quick, maybe big money, people are pondering over.
While many people are embracing this new technology, and are starting to invest in it, the Banking sector has less praising words to say about cryptocurrencies. Basically, what is repeated again and again from recognized and renowned spokesmen, economists, analysts, is that Bitcoin is a bubble which will soon burst, Bitcoin is a fraud, Bitcoin is a ponzi scheme and at this point its only about the greater fool buying, hoping that an even greater fool will buy for a higher price.
Bitcoin is tapped into a speculative urge, where investors are not looking at reassurance from dividends, business plans, cash flows and use cases. For these investors highlighting a big number, like Bitcoin crossing 40.000 USD in 2018, is enough to trigger FOMO emotions that make people go frantic. As an asset with no use cases, no other asset to back it up, no centered control, this bubble will soon blow up in people’s faces and fall back to one big round zero.
But is it really that bad? Can it be that Bitcoin doesn’t hold any real value because there are no use cases for it. I don’t believe this is true. There are use cases and we are already seeing it.
When I look at it from my “isolated” perspective as a middle class person living in Denmark, investing in Bitcoin is highly speculative. What can I use Bitcoin for in the future, other than just investing in it and hoping for people will buy at higher prices. I don’t believe that it makes sense to use Bitcoin as a currency to buy other things. A payment system. The fees are simply too high, the price volatility is too high and transactions are too slow. But this issue is related to Bitcoin, not many other cryptocurrencies. There are many other cryptocurrencies which have super fast transaction speed and very low transaction fees. At this point there are more than 1300 cryptocurrencies with very different features and capabilities than Bitcoin and many of these cryptocurrencies have many great use cases. An example is Ethereum, which is not only a cryptocurrency, but essentially one big decentralized computer.
The use cases for all cryptocurrencies are contributing to the drastic increase of the total market capitalization of the crypto market. It is the blockchain technology behind cryptocurrencies which is creating use cases and therefore value. The blockchain technology makes us able to decentralize the most essential tools humans are using to operate in our daily lives. We will be able to
- Decentralize money systems
- Decentralize computers
- Decentralize the internet
If this happens full scale, no central institution, no government, or organization will be able to single-handedly control what happens within these systems. This can only be done with community consensus. And there will be no need for middle men and escrow services when trading. That is why blockchain is a profound and groundbreaking technology with an incredible value and this value is materializing in the cryptocurrencies which are using it.
What is the value of Bitcoin if it cannot be used as a payment system. Bitcoin can be used, and is used as a store of value, which cannot be controlled or seized by any single government or organization and in contrast to gold, Bitcoin can easily be moved across borders.– Dan R Aigens
So back to Bitcoin. What is the value of Bitcoin if it cannot be used as a payment system. Bitcoin can be used, and is used as a store of value, which cannot be controlled or seized by any single government or organization and in contrast to gold, Bitcoin can easily be moved across borders.
This is the reason criminals are increasingly using Bitcoin or other crypto coins. So, the stolen money cannot be taken from them.
But there are also several applications for Bitcoin if you are not a criminal. For legitimate purposes. I will give two examples here:
Venezuela and Zimbabwe are examples of countries which see hyperinflation of their local currency at the moment. The value of the fiat money that people are holding is turning worthless overnight. In these countries Bitcoin is a safe haven to secure their money against inflation. In spite of Bitcoins high fees and price volatility its still a much better choice than their local currency.
In recent years we have seen that EU has fined big international companies like Google and Apple for billions of euros for “abusing their domination”. If these companies hold their money in cryptocurrencies like Bitcoin, no government can just seize or easily force payout because they control the banks, before a fair trail has been completed.
It is a matter of decentralizing power and wealth, and the applications for this are multiple. The examples I mentioned are only a few of them.
So, there are use cases for Bitcoin. But does it justify its current value. I believe it does. Actually, I believe we have not seen anything yet. Every day 100 of thousands of new investors are entering this space. The US Exchange Coinbase, now has more than 13 mill. users and 10 of thousands are added on a daily basis. And this is just one Exchange out of many. And all the new users want to buy cryptocurrency.
So how does this all end. Investing in Bitcoin is still highly speculative, because nobody can tell, nobody knows, nobody can measure, what the role of Bitcoin will be in some years from now. Yes, there are use cases, but we don’t know what role Bitcoin will have in the global community in the future. Will Bitcoin win the race against other cryptocurrencies? Will Bitcoin be accepted as a storage of value or will governments crush it with regulations? Until we know the future role of Bitcoin in the global community, we cannot predict. As soon as it starts to become transparent which role Bitcoin will get, we will know if Bitcoin is going to reach 1 mill. USD or it will fall to one big round ZERO. I’m not sure there is a scenario in between. I believe this will be uncertain for a while yet. The next 2 – 3 years we will see the market mature and cryptocurrencies are going mainstream. I don’t want to look further than that. But one thing is for sure. The Bitcoin train has left the station and it is not going to stop for the next couple of years. The only question left to ask now is: Do you want to be on it…………..