Here’s Why Bitcoin Will Fail

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Bitcoin will always have a place in history as the mother cryptocurrency – but being the first is no guarantee of longevity.

Netscape Navigator was the first web browser, but it passed into history as newer, better, more functional alternatives like Internet Explorer made the original an obsolete relic of the past.

There are many reasons to believe that Bitcoin is currently headed for the same type of phase-out.

Here’s a look at the main reasons why Bitcoin will fail.

The idea of ​​decentralization has a dystopian side

Bitcoin’s early lure was the democratization of currency — since a central bank doesn’t control the blockchain, crypto levels the financial playing field. But as the ongoing inflation crisis shows, the influence of a central regulatory authority is not always a bad thing.

To combat rising prices, the Federal Reserve raised interest rates to counteract the dollar’s declining purchasing power. As borrowing became more expensive, the Fed’s actions stopped the flow of money into the economy, and the rate of inflation is now cooling.

Bitcoin has no such central authority that can offer a similar remedy.

Digital tokens worth $68,000 in November 2021 are worth around $24,000 now. When a “currency” loses nearly two-thirds of its value in less than a year, sensible economists would consider it a crisis.

With no central authority to handle this crisis, Bitcoin owners can only wait and hope for the best.

Bitcoin is not a viable currency

Bitcoin’s breakout year was 2017, when it broke $1,000 for the first time in January. It was the start of an extraordinary bull run that saw the price double to $2,000 by May. By the end of the year, Bitcoin had risen to $19,000.

While the mainstreaming of the world’s first cryptocurrency cooled things down a bit, Bitcoin is still an untamed beast. On August 15, Kate Waltman, a CPA specializing in crypto, told Time NextAdvisor that many experts predict that Bitcoin will reach $100,000 in 2022.

Whether that’s true or not, it’s certainly possible given Bitcoin’s history of rapid, wild gains—and that possibility is precisely what makes Bitcoin an unrealistic currency. After all, who on earth would use Bitcoin to buy a $5 latte when the same amount of crypto could be worth $50 a few days later? If a $20 bill could buy a pizza one day and a steak and lobster dinner the next, it would be too unpredictable to be a practical medium of exchange – just like Bitcoin.

It has no intrinsic value

Shares have value because they represent ownership in a company. Raw materials have value because they are the raw materials used in the production of goods.

But according to Brookings, “Bitcoin investors seem to be addicted to the theory of bigger fools – all you need to profit from an investment is to find someone willing to buy the asset at an even higher price.”

In short, Bitcoin has no intrinsic value – it is valuable because people have decided to assign value to it.

Bitcoin supporters argue that the same can be said for the paper rectangles emblazoned with pictures of dead presidents that we carry in our wallets. After all, money is a construct just like Bitcoin. Since the dollar was taken off the gold standard, they argue, the only real value of fiat currency is that society agrees that it is actually valuable.

Not really.

The US dollar is backed by the full faith and credit of the United States government, which can guarantee its currency by selling public assets, issuing bonds, and requiring individuals and businesses to pay taxes in the currency they issue.

Bitcoin cannot.

An investment in Bitcoin is not an investment in blockchain technology

There is little dispute that blockchain – the computational technology that underpins cryptocurrencies such as Bitcoin – will play a major role in the next iteration of the internet and the future in general.

According to PricewaterhouseCoopers, blockchain technology is poised to revolutionize the automotive industry by managing shared ownership of self-driving vehicles. It can make the financial industry more efficient by greatly reducing transaction costs. Blockchain technology can also make voting more accessible and safer while improving secure data sharing in healthcare.

All of this may be worth investing in, but contrary to popular belief, buying Bitcoin does not give you access to any of it.

Other cryptocurrencies offer more utility

To demonstrate the cryptocurrency’s lack of intrinsic value, Bryan Routledge, associate professor of finance at the Tepper School of Business at Carnegie Mellon University, compared Bitcoin to gold in an interview with Time NextAdvisor.

He said that gold is just a piece of metal, no more or less valuable than the rocks and dirt found next to it in mines. The only reason it’s valuable, he claims, is because people assign value to it, just like Bitcoin — but that’s not really a fair comparison.

Gold offers functional utility far beyond the “bigger fool” dynamic that Bitcoin lives and dies by.

Gold does not react with oxygen, which means it does not rust or tarnish like other metals. It is highly malleable, making it easy to create jewelry and other artistic elements. Gold conducts heat and electricity, and the connections last longer than both copper and silver. It is also very ductile. According to the American Museum of Natural History, gold can be threaded into the thinnest of wires—a single ounce can be pulled out in a 50-mil thread—which is why it is so important in electronics micro-manufacturing. It also has important applications in dentistry – and of course it is beautiful.

Bitcoin, on the other hand, does not “do” any of the things that other cryptocurrencies with real, gold-like functionality can do.

For example, Ether gives you access to the Ethereum blockchain, where NFT-based digital art sales and peer-to-peer lending take place.

According to Outlook, stablecoins such as Tether derive their value from their corresponding external assets, such as gold or the US dollar.

Siacoin eliminates the need for expensive cloud storage by replacing registries, servers and trusted third parties with blockchain-based marketplaces for data storage.

What does Bitcoin do?

Final Take

There was a time when Bitcoin was the only cryptocurrency. Today it is just one of at least 19,000 rivals.

While cryptocurrency probably won’t disappear into extinction, Bitcoin just might. If you are convinced that Bitcoin may actually be a dead coin going, don’t panic sell. You will lock in losses if you unload BTC while down. If you sell while you’re up, the tax authorities will hit you with capital gains tax. Talk to your financial advisor, but consider waiting out the crypto winter if you bought Bitcoins for more than they’re worth now, and if you’re up, consider waiting until short-term gains turn into long-term gains to minimize your tax burden.

The information is accurate as of August 19, 2022.