Can Bitcoin fail? 9 reasons why Bitcoin could disappear
Many people wonder if Bitcoin can fail. In this article, I discuss 9 reasons why Bitcoin could disappear in the future. At the end of the article, I also discuss why Bitcoin may ultimately not disappear.
Summary: why can Bitcoin fail?
- Volatility: Bitcoin is too unstable and therefore difficult to use.
- Hacks: Hackers can steal Bitcoins and ruin their reputation.
- Criminals: Many criminals use Bitcoin.
- Loss: You can easily lose Bitcoins.
- Sustainability: Bitcoins are bad for the environment.
- Scalability: There is a limit on the amount of transactions.
- Political pressure: Countries can ban Bitcoin.
- Crisis: The government cannot intervene in a crisis.
- Competition: There are superior cryptocurrencies.
Reason 1: Bitcoin is too volatile
One of the main reasons why Bitcoin could fail, is that the currency is much too volatile compared to fiat currency. The idea is that the more people use bitcoins, the more it becomes an accepted currency.
The problem, however, is that it is necessary for the currency to have a certain value for this to happen. Even not too stable foreign currencies have a predictable floor and ceiling for their value. Once those margins get out of hand, the currency becomes worthless.
This can be seen in a country like Zimbabwe, which experienced a lot of inflation. Now that the price of Bitcoin actually fluctuates every day, it is not possible to recognize these high and low underlying values. This makes it not very suitable as a normal currency.
However, as a smart speculator, you can actually take advantage of this volatility. Many crypto exchanges offer free demo opportunities. Take a look and open a demo with a reliable provider:
Reason 2: Hacks and the Reputation of Bitcoin
Bitcoin exchanges are also known as platforms or markets where people can buy and sell bitcoins. However, these platforms are vulnerable to hacks.
For example, Mt. Gox, a Bitcoin exchange in Japan, was once hacked. The losses for the users are estimated to be more than half a billion dollars. Mt. Gox had a large share in the global Bitcoin market. At that time, more than 75% of all transactions were processed through Mt. Gox.
The problem, however, is that it is necessary for the currency to have a certain value. Even not-too-stable foreign currencies have a predictable floor and ceiling for their value. Once those margins get out of hand, the currency becomes worthless.
This can be seen in a country like Zimbabwe, which experienced high inflation. With the price of Bitcoin fluctuating every day, it is not possible to recognize these high and low underlying values. This makes it unsuitable as a normal currency.
However, as a smart speculator, you can actually take advantage of this volatility. Many crypto exchanges offer free demos, so take a look and open a demo with a reliable party:
Reason 2: Hacks and the Reputation of Bitcoin
Bitcoin exchanges are also known as platforms or markets where people can buy and sell bitcoins. However, these platforms are vulnerable to hacks.
For example, Mt Gox, a bitcoin exchange in Japan, was once hacked. The losses for users were estimated at over half a billion dollars. Mt. Gox controled a large share of the global bitcoin market. At that time, over 75% of all transactions went through Mt. Gox.
At the time Mt. Gox filed for bankruptcy, over 750,000 bitcoins belonging to customers had disappeared. Those who had their money on this exchange lost their assets. This makes it riskier than storing money in a bank.
Recently, the crypto exchange FTX also went bankrupt, causing customers to once again lose a large portion of their crypto. You can choose to store your Bitcoin in an external wallet, but even then, there is a risk of hacks. These types of hacks weaken the reputation of Bitcoin, putting its existence in danger.
Reason 3: Bitcoin is widely used by criminals
In discussions about Bitcoin, there is often talk of criminals using the currency. This is mainly due to the whole phenomenon surrounding the website Silk Road. Silk Road was an online marketplace that operated as a hidden Tor service. A user of the site could buy illegal goods and services anonymously and without supervision. Users of Silk Road purchased drugs or weapons, for example.
In March 2013, 70% of the 10,000 products on the site consisted of illegal drugs. Although Silk Road no longer exists, there have been enough replacements that have taken its place. These websites all accept Bitcoin for carrying out illegal activities.
When criminals use Bitcoin for illegal purposes, its existence is put in danger. More and more governments see Bitcoin as a threat. In some cases, this leads to regulation, while in other cases it leads to prohibitions.
For the existence of Bitcoin, it must be accepted as a means of payment in as many countries as possible.
Reason 4: you can lose your Bitcoins
If you have a bank account, it is not necessary to remember your account number to access your money. If you have a valid ID, you can always go to the bank if you have lost your card.
However, this is not possible with Bitcoin. If you completely lose access to your digital wallet, you can say goodbye to your money. For example, there is a story of a man from the United Kingdom who had a hard drive with Bitcoins. He lost this drive, as a result of which he also lost all his money.
Furthermore, your private keys can be stolen. Although more and more secure wallets are being created, it is a fact that Bitcoins can be lost quickly if you don’t know how to handle them properly.
Reason 5: Bitcoins are not sustainably mined
As you know, mining Bitcoins is the process of adding blocks to the blockchain. Bitcoin transactions are added to the public ledger, and new bitcoins are created. Using mining software, “miners” compete to solve a difficult mathematical problem to validate the transactions.
The miner who does this the fastest gets a transaction fee and a subsidy of new bitcoins. It turns out that mining all Bitcoins costs over one terawatt-hour of electricity per year. That is roughly equivalent to the total electricity consumption of Switzerland per year. This shows that mining Bitcoins is far from sustainable.
This inefficiency is due to the fact that the winner who finds the solution to the puzzle receives bitcoins as a reward. For every winner, there are therefore thousands of losers who have all consumed electricity to find the solution.
Reason 6: Bitcoin is not scalable
Another major problem with Bitcoin is its limited scalability. The network can only execute a handful of transactions per second, while payment networks like Visa and PayPal can easily execute thousands per second.
Bitcoin cannot take a serious position as a payment option when it takes a long time for a transaction to be executed. In practice, it takes at least ten minutes for the transaction to be executed.
Furthermore, the blockchain is getting longer and longer, as all executed transactions are continually added to it. This makes it increasingly difficult for new miners to participate in the mining process, as more computing power is required.
As a result, the decentralized nature of Bitcoin decreases, as the majority of calculations are performed by (centralized) mining pools. This means that a small group of people is gaining more and more control over Bitcoin.
Reason 7: Political Pressure
Political pressure can also put the future of Bitcoin under pressure. The anonymity of Bitcoin is seen as a strength by many users. Of course, it’s beneficial to protect your privacy when sending money, but governments don’t always see it that way.
Most governments want to maintain control over the payments in their country. This way, criminal transactions and terrorists, for example, can be tracked down. In totalitarian regimes like China and Russia, governments try to control their citizens completely. An anonymous, digital currency doesn’t help in this regard.
When countries ban transactions with Bitcoin and other cryptocurrencies, this can put pressure on the currency’s value.
Reason 8: No Rescue Plan
During an economic crisis, governments apply all kinds of tricks to give the economy a boost. For example, by printing money, they can prevent companies from collapsing.
Governments have no control over Bitcoin. When there is a crisis, the government can do little about it. When the government cannot intervene in times of crisis, total panic can break out.
This is also a reason why Bitcoin could fail: governments will not want to take this risk and therefore will not quickly adopt Bitcoin as the primary payment method.
Why Bitcoin Could Survive
Despite these 9 reasons why Bitcoin could fail, this is by no means certain. There are also sufficient reasons why Bitcoin could survive:
- Bitcoin scarcity: when something is scarce, its value rises. There are fewer and fewer Bitcoins being produced, which means that its value would only rise with equal demand.
- Companies and Bitcoin: more and more companies are showing interest in Bitcoin. Companies like Tesla and PayPal have experimented with Bitcoin.
- Impossible to stop: governments cannot simply shut down Bitcoin. Due to its decentralized nature, the crypto will actually always exist.
- Technology of the future: blockchain is a relatively new and innovative technology. As long as the blockchain remains in the spotlight, Bitcoin can continue to exist.
- The first crypto: Bitcoin is the first and most well-known cryptocurrency. It’s difficult to beat the dominant player in a market.
- Speculation: by smartly reacting to fluctuating prices, people can earn a lot with crypto. This keeps Bitcoin attractive to a large group of people.
If you want to see more details about why Bitcoin might not fail, take a look at the video below:
Will Bitcoin Disappear?
Bitcoin also faces competition from other cryptocurrencies. Bitcoin is of course the original cryptocurrency, and the system behind it is brilliant. However, many other stronger cryptocurrencies have emerged since then.
Personally, I believe that the blockchain will certainly remain. However, in the future, Bitcoin could be replaced by a coin that is simply better from a technical perspective.
Will Bitcoin Fail?
In this article, you should now have a better idea of the future of Bitcoin. It’s true that Bitcoin is a revolutionary currency that could be widely used.
But before that happens, many obstacles need to be overcome. If the currency fails to address these problems, it’s possible that it will fail. If this happens, investors would lose a large part of their invested amount. Therefore, only invest in crypto with money that you can afford to lose.
