Bitcoin Hasn’t Lost Its Way – It’s Just Getting Started
Bitcoin has seen a massive decline in 2018 and it looks like it may get worse before it gets better. It is leaving investors grasping for reasons why the world’s top cryptocurrency is falling so hard, with some wondering – could this be it for Bitcoin?
Has Bitcoin Lost Its Way?
Interest in Bitcoin – and cryptocurrencies in general – reached a frenzied pitch back in December of last year as mainstream media sources scrambled to cover the digital currency’s meteoric rise to an all-time high of near $20,000. Since then, however, that surge has lost much of its momentum as prices continue to decline.
Although Bitcoin continues to appear in the mainstream media spotlight on a near-daily basis, the focus has shifted to the price decline as well as speculation on just how low the cryptocurrency could go. It has caused many commentators, experts, and investors to wonder: Has Bitcoin has finally fallen off the map or will we look back at the first half of 2018 as just another one of its many dips on the way to the moon?
If a recent article in Forbes is any indication, we may as well pack it in right now. Written by Peter Tchir, the piece attempts to point out the various reasons the author feels the cryptocurrency appears to be imploding. Unfortunately, and with all due respect, most of the arguments made lack substance and – in some cases – understanding of the subject matter.
Inefficient Means of Exchange
This is probably the only argument the author makes that has any truth to it. As much as I love Bitcoin, I am also a realist. At the height of Bitcoin-mania, it was taking hours – even days – for transactions to be confirmed.
Adding to the misery of long transaction times were high transaction fees. During this time, people were paying $20, $30, even $50 or more to send Bitcoin transactions. At an average size of 250 bytes per transaction, that works out to as much as $0.20 per byte. Because of this, Bitcoin was ill-suited for smaller day-to-day transactions, like the oft-cited buying a cup of coffee.
The current Bitcoin landscape is much different now, something the author at Forbes fails to take into account. With SegWit posting close to 38% adoption in recent weeks and the Lightning Network growing to more than 2600 nodes and more than 5300 channels, Bitcoin transaction times and fees have been reduced exponentially. In fact, just the other day, a single bitcoin transaction worth more than $300 million was confirmed with a transaction fee of just $0.04.
So while this argument may have been true at one time, as solutions like SegWit and Lightning Network see increased adoption, Bitcoin adoption is likely to increase as well.
Regulation Making it Harder to Hide Wealth from the Government
Whenever a so-called ‘expert’, official, or other talking head starts pontificating on the evils of Bitcoin, one argument that never fails to get trotted out is how people are using Bitcoin to hide their money from the government. That argument, of course, usually segues in with the “Bitcoin is cryptocurrency of preference for criminals and Very Bad People” argument.
Bitcoin wasn’t designed to hide wealth from the government. It was designed to allow people to control their own wealth. There is a difference. And frankly, if anonymity is a user’s primary concern, there are far more privacy-centric cryptocurrencies out there. Bitcoin is hardly anonymous – in fact, there is an entire growing industry dedicated to tracking transactions.
Of course, even with all of these developments, Bitcoin is still viewed by many as the currency of criminals. Salacious reports of crimes committed involving Bitcoin are being plastered across the Internet, but the truth is that the vast, vast majority of bitcoin transactions are non-criminal in nature.
ICOs Facing Increased Government Scrutiny = Less Demand for Bitcoin
Out of all of the author’s arguments, this one had me questioning his grasp of the landscape the most. In the article, he states:
There was a window where access to Initial Coin Offerings created a new need to own Bitcoin, but that has slowed as ICO’s have come under intense scrutiny.
Basically, he is claiming that because ICOs have come under increased scrutiny, investor interest has slowed, leading to less demand for Bitcoin. Granted, governments around the world have been cracking down on ICOs but even so, interest in such projects continues to flourish. According to ICOdata, in the first six months of 2018, there have been 885 ICOs launched and more than $5.7 billion raised. Compare that to the 872 ICOs and $6.1 billion raised in the entirety of 2017.
I would hardly call that waning interest.
But the kicker in this argument is the assertion that there is less demand for Bitcoin as a result of the increased scrutinization of ICOs. While Bitcoin is accepted by some ICOs, the go-to cryptocurrency for most projects launching an ICO is Ether.
Government regulation of ICOs may have a detrimental effect on the price of Bitcoin (doesn’t everything these days?) but not on the demand for it.
How can Bitcoin make a comeback?
Many new people in the space bought Bitcoin during the bull run, resulting in some terrible returns. But this was kind of expected. No asset increases 20x in less than a year without coming back down at some point. The correction was bound to happen.
Bitcoin can – and will – rebound. In terms of technology, nothing has really changed. Bitcoin still has the same attractive aspects as it did a year ago, albeit with lower fees. People can still speculate on it, send worldwide payments, buy goods and services, and have true control of their funds.
So no, Mr. Tchir. Bitcoin hasn’t lost its way. It’s just getting started.
What do you think about Bitcoin’s price decline? Have we seen the worst of it, or are there more dips to come? Let us know in the comments below!
Images courtesy of Shutterstock, Blockchain.info