Why Cryptocurrency Has Been Left Behind, For Now

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Bitcoin was the buzzword of late 2017. In December, Bitcoin topped out at 20,000, a record which seemed unattainable to most. This new value caught many by surprise, immediately shock and awe took over the cryptocurrency market. Within the course of 2 months, billions of dollars flooded into the cryptocurrency market, causing many coins to skyrocket. Bitcoin and other cryptos depend on volumes to rise in “value”, the more bitcoin traded, the higher the price. Therefore, when Bitcoin became the thing everyone was talking about, the price skyrocketed. There are no assets behind bitcoin, no revenue stream, or underlying value. People will argue that the blockchain technology is the value, yet that is simply not true given that many other coins have far better blockchains than Bitcoin and are still priced below a dollar. Its value is dependent on speculation and how much the next person wants to pay for it. Bitcoin skyrocketed due to speculation, its human nature. Many saw opportunity not because of the value, but because everyone else was buying it and because the price continued to rise. Greed took over. Unfortunately, once the fad died, Bitcoin collapsed and many people lost a lot of money. Bitcoin was the buzzword of late 2017. In December, Bitcoin topped out at 20,000, a record which seemed unattainable to most. This new value caught many by surprise, immediately shock and awe took over the cryptocurrency market. Within the course of 2 months, billions of dollars flooded into the cryptocurrency market, causing many coins to skyrocket. Bitcoin and other cryptos depend on volumes to rise in “value”, the more bitcoin traded, the higher the price. Therefore, when Bitcoin became the thing everyone was talking about, the price skyrocketed. There are no assets behind bitcoin, no revenue stream, or underlying value. People will argue that the blockchain technology is the value, yet that is simply not true given that many other coins have far better blockchains than Bitcoin and are still priced below a dollar. Its value is dependent on speculation and how much the next person wants to pay for it. Bitcoin skyrocketed due to speculation, its human nature. Many saw opportunity not because of the value, but because everyone else was buying it and because the price continued to rise. Greed took over. Unfortunately, once the fad died, Bitcoin collapsed and many people lost a lot of money.                                                                                                                              Although Bitcoin has been the poster child for cryptocurrency, it has some of the worst technology. Bitcoin is an outdated coin which is not robust enough to be used for its intended purpose. Bitcoin is supposed to be used a currency, not a means of investment and in its current form it simply cannot function as such. Bitcoin is not only restricted by the speed of transactions, but also the number of transactions per second. It is estimated that Bitcoin can only do about 3-5 transactions per second, this limits it from being a global currency and is why at one point it could take up to three weeks to buy, trade, or sell Bitcoin. For example, Visa processes 24,000 transactions per second and it is just one of the many major credit/debit card companies. Other cryptocurrencies have far better architecture allowing for thousands of transactions per second. For example, Ripple’s creators realized this issue and produced their coin to handle 1,500 transactions per second, but still shy of the 24,000 visa can handle. Another limitation includes its volatility, within the span of 20 minutes the product you thought was $5 dollars could change to $3 or $7. This makes Bitcoin a terrible currency to use for everyday transactions and makes it impossible to price products. The liquidity of bitcoin is also a large issue. Much of the Bitcoin owned is being held and not actively used, this goes hand in hand with the slow translation time. Once you buy Bitcoin, which is in some cases a 7 day process, you have to wait another 7 days to sell it. This presents a major issue as once Bitcoin is bought it is extremely difficult to convert back to US dollars. Overall, Bitcoin is not fit to be used as a currency, especially a global one as it was designed to be.                               Adding to peoples questioning of Bitcoin is its sketchy past. Bitcoin was first used to sell drugs and weapons on the black market and was mainly seen as a dirty currency used by cartels and criminals. This stigma was eventually forgotten when people saw the price skyrocketing. Cryptocurrency may be the future of commerce, but the infrastructure in its current state is lacking. This has made Bitcoin an trading vehicle rather than a currency used for its intended purpose, a phenomenon which has caused millions of people to lose money on crypto. People bought Bitcoin for the reason of making money, not for the purpose of paying for their next Amazon purchase. Until Bitcoin and many other cryptocurrencies can find a way to fix their flaws, they will continue to be driven by just speculation, rather than a functioning currency.

About the author

Reid Monahan is a 17 year old from Concord, Massachusetts. He is a member of the St. Mark’s Class of 2019. He plans on pursuing a career in venture capital, software development and other investments. He intends on a major in economics and a minor in computer science. Some other interests include: squash, golf and computer science.

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