Since the meteoric rise of the bitcoin, and especially after it entered “black tulip”-type speculative territory in q4/2017, I have been asked multiple times by family members, friends and work relations about my personal opinion on the recent developments and future of the cryptocurrency. All, without any exception, expected me to have had a windfall on it as they all knew my early interest in cryptocurrencies. Some even had read my blog posts on Blockchain, Cryptocurrency, Bitcoin, and Ripple from as long as 5 years ago here at Red Planet Dust.
I have had to disappoint them: I sold off my last bitcoins well before the spectacular rise of 2017. Of course, I have asked myself a few times: “What if?”. But that is water under the bridge. The reasons I deliberately exited my bitcoin position are still valid for me today:
- Bitcoin is to be considered an (illusive) commodity, not a practical currency.
- The exchange rate of Bitcoin can be played, some attribute the meteoric rise to some big parties playing it.
- Bitcoin is increasingly slow and expensive (fees) to exchange; maybe the Lightning network initiative can make a difference?
- While volatility is high (good for traders!) trading Bitcoin is still cumbersome due to low liquidity and obstacles for arbitration between exchanges; Trading strategies have been underpinned with increasingly sophisticated trading tools though.
- Bitcoin’s anarchistic character will be pounded into line by real-world regulations;
- Bitcoin needs a humongous amount of energy, this is not sustainable in the long run.
- Bitcoin has nothing to relate it to in terms of valuation and value development.
- The price volatility is huge; too much for my stomach to bear.
- Bitcoin is a zero-sum game: it is just redistributing money between winners and losers.
- What happens if more people want to extract money from the bitcoin pool than to put in?
- A bitcoin has no intrinsic value: only the belief that somebody else out there will buy your bitcoin against current rates or higher for real money or equivalents in goods/services believing the same ad infinitum. If you do not believe this premise you will sell your bitcoin as soon as possible.
- Cryptocurrencies are linked together in their value development even though the characteristics of the various solutions are pretty different. This proofs in, my eyes, that there is no inherent logic at all to the value.
Using the blockchain for cryptocurrencies and smart contracts is very potent. There are a lot of different solutions already but technology, regulations, use cases and user acceptance have not found their sweet spot yet. Until then having bitcoin, or other cryptocurrency positions is based purely on speculation (and greed).
Some like the thrill, some might even be able to afford the losses if incurred but investing in Bitcoin is like going to a casino. To me, not having a fund behind me with a sizeable cash pocket, the inefficiencies of Bitcoin today makes it a casino to me. I concluded a long time ago that I do not want to truly gamble with my savings.
IMHO the future of cryptocurrencies is the digital version of existing fiat currencies or if bound 1:1 to a fiat currency.