Are you wondering if Bitcoin has problems that can make it fail eventually? Here is a list of issues that could lead to that.
Despite Bitcoin being the future of money, it has problems that could make it fail eventually. On the other hand, this article is not proclaiming that this digital money won’t succeed. Bitcoin is the most popular cryptocurrency, but severe problems with this digital money may cause it to fail. Here are the reasons.
There is No Stabilizing Force
The government issuing a conventional currency defines it, and more so, central banks go into the international money markets to perform market operations that involve buying or selling their national currencies to keep them stable. Without stability, a coin does not work.
On the other hand, Bitcoin’s volatility makes it a very terrible currency. It does not matter how many vendors claim to accept this electronic money. Also, most people purchase this virtual currency as a speculative asset, so they won’t use it to buy anything because they would use fiat money. Others opt not to pay with Bitcoin because they believe that the price of this digital money will go up in a few weeks. On the other hand, if this digital money’s value drops, most vendors and business owners will stop accepting it because they do not want its worth to go down by 20% a week after.
There is no Real Value
Some people claim that conventional currency or, in simpler terms, fiat cash also does not have real value because it moved out of the gold standard. On the other hand, that is incorrect because fiat money has the value of the guarantee of the government that uses it. Governments have the power to tax their people and businesses and also the ability to sell public assets, issue bonds, and other ways to guarantee their currencies. In simpler terms, formidable powers give the confidence that the currency’s value will be there.
Also, stocks have value because of the companies’ ability to create profits from the goods and services they sell. In addition, commodities have real value because industries purchase them as raw materials to produce goods and services.
On the other hand, the only value this digital money has is somebody else’s willingness to pay it. In that sense, it’s similar to a piece of artwork. However, a part of artwork can beautify the space that it occupies. Bitcoin does not have that.
It is in Competition with National Currencies
Bitcoin supporters claim that this digital money will replace fiat money and is the future of money. If Bitcoin is going to be the future of money, it is in constant competition with national currencies. More so, it does not make sense that governments like that China can cancel their currencies and use Bitcoin, which no one can control. To invest in digital yuan you can visit yuanpay-group.de
The truth is that the decision would be fatal to their monetary systems. Recently, China banned the mining and trading of this digital money. Other countries have hinted that they would be doing the same. As a result, governments will not adopt this electrical money. Instead, they will issue their versions and ban this digital money.
Furthermore, when one invests in this digital money, they do not invest in blockchain technology. While tangible assets back cryptocurrencies like Stablecoins, they are more suitable to use as currencies because they fluctuate as much or as little as their underlying assets.
The truth is Bitcoin is an ideal dream. The massive liquidity of this asset in the markets is a critical reason for the rise in its value. However, this is not sustainable over the long term. The advantages Bitcoin has over fiat money, like speed, will be overtaken when fiat cash becomes fully digital.