Just over a year ago, Bitcoin ruled the world. After Thanksgiving, it was climbing towards the sky! From its humble origins as a payment system for weed, it spread across the world to an investment for the average guy. That smoked a lot of weed. Sure, no one could explain what it was or why it was worth so much. Or maybe they did but… you know… everyone was smoking A LOT OF WEED! But the price just kept going up, up and up. There was no limit! When Bitcoin hot $20,000 last January everyone with a Bitcoin asked, “When will it hit $1,000,000?” It was just inevitable, right? So… like… why is my bitcoin worth just $3,500 today?
The rise and fall of the Bitcoin
That rise is amazing. Incredible. Unless, of course, you happen to be a finance professional. If you have a finance
- Paul Krugman: Famed Noble-Prize winning America economist Paul Krugman made a simple assessment of the Bitcoin, “The Bitcoin is Evil!“
- Bill Gates: In a Reddit AMA (Ask Me Anything) Bill Gates said of all cryptocurrencies (of which Bitcoin is just the oldest), it is primarily used to buy drugs, pay kidnappers, and fund terrorism… “it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and cryptocurrencies is super risky”.
- Warren Buffet: Perhaps his best and shortest description of the Bitcoin was, “poison squared.”
- Nouriel Roubini: A
well known economist from NYU, “blasted bitcoin fanatics as ‘suckers’ and said repeatedly that its underlying technology was ‘bulls–t.'” Hey… New Yorkers! Know what I’m sayin’?
Bitcoin started as a very good idea. The Internet is unsafe. You don’t know who you are dealing with or if they are honest. Also, there are a lot of interesting things on the Internet that aren’t always completely legal but may not be explicitly illegal. If you are of a hyper-libertarian, perhaps an untraceable form of money to deal with questionable players is a good thing?
Anyway, Bitcoin started it’s a steep climb and others noticed that there might be something to the Bitcoin. The underlying technology (Block Chain) does have interesting benefits, such as protection against theft and hacking. For big banks and financial firms, paper money and checks have been way too vulnerable. Even credit cards with chips can be hacked. Almost every day there’s another story about a bank, credit card company, big retailer or even a government agency that has been hacked. Clearly, we need Block
Block Chain is not specific to Bitcoin. You can have Block Chain without buying Bitcoins. Big banks and big corporations are looking into proprietary uses of Block Chain. The success of Bitcoin has made financial institutions aware that if they don’t do something, they may become obsolete. Still, there are issues that are nibbling away at the value of Bitcoin.
- Competition: As the value of bitcoin rose, Etherium, Rippel, Lite and other cryptocurrencies joined the game. With more options for cryptocurrencies, the investment pie is getting divided up into thinner and thinner slices. Before Bitcoin can ever return to $20,000, you can expect a lot of new cryptocurrencies to appear and to further dilute the market!
- Aging Technology: In the beginning, Bitcoin led the cryptocurrency race. After all, it had a headstart. Unfortunately, it has not aged gracefully. For example, Bitcoin is rumored to have a limit of 7 transactions per second. Globally! By comparison, Visa’s credit cards process an average of nearly 2,000 transactions per second, and at peak times as much as 4,000 transactions (cashing a check, selling something, depositing money) per second. While Ripple still falls short at 1,500 transactions per second, it’s still far better than Bitcoin. And before you ask, NO! Faster computers won’t fix the problem.
- Fees: In the early days, Bitcoin hustlers said that the “old world” was filled with unfair financial fees. Fees for cashing a check, for using your credit card, for buying stock. Industries have been built just to collect fees. Countries charge you for moving money across their border. Bitcoin will distupt all of that! Once they charge you a fee. Bitcoin never charges a fee, but there is a fee for the Bitcoin exchange, and the Bitcoin vault, and the Bitcoin ATM, and the… well, Bitcoin anything. The fees on Bitcoin are staggering, as much as a third of the cost of an exchange. Which is fine when you are laundering money or buying drugs, but not so good when day to day purchases have to carry the cost of using Bitcoin.
- Legal Weed: Bitcoin might not exist if weed was legal in 2009. While Bitcoin had loftier ambitions than being Weedcoin, but Weed and Bitcoin have a history together. As medicinal and other forms of sometimes, legal weed grew, Bitcoin became the defacto standard for buying things that could land you in jail. But weed is being legalized around the US and the world.
There are a lot of other reasons why Bitcoin has been hammered by the market. The most important reason why is pretty simple. Everyone who went all in on Bitcoin before tanked is more than a bit ticked off. If you paid $20,000 for a Bitcoin, you’re probably a millennial. You were born into an age of financial problems, and Bitcoin was supposed to be the great equalizer. Instead, you need to work overtime at Starbucks to pay the rent. Not sure how many more times you can sell the Bitcoin dream to this crowd.
Is Bitcoin circling the drain? Can they recover and get back to where they were a year ago? Maybe. Are they ever going to be worth a million dollars? Well, you never can say, and the future is big, plus… NO. NO. They are NEVER going to get you your money back! You people have got to LEARN from your mistakes!
But… ummm… Ripple. Well, that could be different. I mean, maybe?