What the innumerable naysayers are saying about Bitcoin
Well, Bitcoin has surpassed the 100 Billion market cap today. Whilst some expected no less, it's safe to say that pretty much throughout its journey to this milestone, speculation has been rife worldwide: Is Bitcoin is in a bubble that's ready to pop, or does Bitcoin represent a more significant movement that's not only likely to pass the test of time, but destined to change our lives in general and banking in particular? Depending on which Finance CEO you listen to, the general sentiment varies considerably. This, in turn, tends to perpetuate a shroud of uncertainty over Bitcoin.
But recently, the balance seems to be tipping in favor of Bitcoin and its proponents. Bitcoin has, during the past several months, shown incredible resilience in the face of the at times fierce headwinds. In fact, in spite of China's tightening Bitcoin regulations and the various high-profile critical notes from the likes of JP Morgan's Jamie Dimon and BlackRock's Larry Fink, Bitcoin is standing its ground, gaining ground even. To the tune of USD$100 Billion, no less!
What's driving Bitcoin's relentless appreciation? There's no doubt about it, Jamie Dimon and Larry Fink are exceptionally smart people. That much we know. Could they still be wrong about Bitcoin? Well, let's have a closer look at their gripes with Bitcoin. Let's see if their arguments stand up to scrutiny.
Rival Digital Currencies = Inflation
The rationale here is that, Bitcoin's claims notwithstanding that it's a finite asset, Dimon and his fellow naysayers counter that there are over 1000 other cryptocurrencies, each vying for investors' money, ultimately halting Bitcoin's ascent. The burgeoning cryptocurrency space, they claim, is akin to fiat inflation, the kind of evil Bitcoin is said to be immune to.
This argument has since been borrowed over and over by other Bitcoin sceptics. Of course it's a non-argument; it's like saying gold can never appreciate in value, because there are countless other metals out there. Everybody knows that the vast majority of metals are not precious metals. Gold is the metal everybody knows as the premier precious metal. Similarly, Bitcoin is the principal cryptocurrency. Matching alt-coins to Bitcoin is tantamount to matching iron, nickel, cobalt, etc to gold.
To be sure, there are other metals that are considered worthy. Some are commodities after all. But not only are these common metals nowhere near the value of gold, each of their applications also tends to be very different to gold's. Just like some the more niche cryptocurrencies that are showing promise in their respective realm, these non-precious metals have their own specific raison d'Ítre and, as such, coexist in their metals ecosystem. But, just like these non-precious metals don't compete with gold, alt-coins don't compete with Bitcoin.
Not Recognized By Governments
An oft-heard claim by Bitcoin critics is that Bitcoin is trying to supplant fiat money and that this will result in governments crushing Bitcoin, as these will never permit this to happen. Of course Bitcoin has no such wholesale destructive goals. Bitcoin would be an ideal parallel payment system, allowing consumers choice. If this is considered disruptive, then so be it. But disruption is not evil per se and, as such, by definition, needs not be crushed. In fact, looking at the disruption that has been going on in other industries lately, clearly, disruption results in a lot of good.
Incidentally, in spite of Bitcoin's nascence, there are countries that have embraced Bitcoin wholeheartedly. These include Japan, South Korea, Singapore, Switzerland and others. These countries are aware that the emergence of Bitcoin, apart from being a positive development for end-users in particular, also have macro-benefits, such as innovation, job creation and more. Many other countries are studying Bitcoin for the same reason, as well as for their FinTech hub aspirations.
Recently, whilst not outright embracing it at the current time, countries like China, Russia and the US have started signalling that once regulation is in place, they'll become accepting of Bitcoin. Sorry, Jamie.
Another chestnut repeated regularly is the claim that Bitcoin doesn't scale. Whilst this may have been true pre- SegWit and pre- Lightning Network, this is no longer the case. But really now, declaring at this juncture that Bitcoin can only fail, due to its transaction bottle-neck is akin to the belief - back then - that the Internet will fail because of its inadequate 28.8k modem speed. Bottom line, once SegWit and Lightning Network are running full-on, Bitcoin's transaction speed will rival and even exceed that of Visa.
Bitcoin cynics are keen to mention Mt. Gox and Bitfinex as two high-profile examples of how easy it is to hack into Bitcoin's code. Of course, it wasn't the Bitcoin code that was hacked, it was the exchanges themselves. And since Bitcoin stored on exchanges is "custodial", these Bitcoins can then be misappropriated. It's important to note that in all of its existence, Bitcoin itself, despite it being the biggest honey-pot ever, has never been hacked. Period.
Bitcoin-detractors also like to draw attention to Bitcoin's volatility. To be sure, Bitcoin is probably one of the most volatile investments you can make. However, clearly, the long-term trend line has been going up. Of course, results in the past have no bearing on future results, but bemoaning Bitcoin's volatility is like whining about your house being untidy for all the money lying around. It's the kind of problem we love to have. As an interesting aside, when the USD detached from the Gold Standard, for a number of years, gold was just as volatile as Bitcoin is now.
Bitcoin is in a bubble. How often have we heard this? How many times has Bitcoin been juxtaposed to the Dotcom bubble or the Tulip bubble? Countless times. Now, granted, there may well be a bubblicious element to the value of Bitcoin. However, this in no way repudiates Bitcoin's revolutionary benefits and enormous potential. Daytraders and speculators may have added a few percentage points of froth to the value of Bitcoin, but the underlying worth of Bitcoin is undeniable.
Having said all of the above, obviously, Bitcoin isn't by any stretch established yet. Just like any fledgling development on its way to mainstream, there are hurdles to conquer, issues to resolve and challenges to beat.
But what is quite obvious is that Bitcoin has been gaining traction. In actual fact, oscillations notwithstanding, its momentum has been gathering speed.
Regardless of the many naysayers, the future for Bitcoin is bright. Here's to USD$200 Billion!
I wrote the above article myself and it expresses my own personal opinions and views on Bitcoin. I am unable to guarantee that the information and/or results will be correct. Furthermore, whilst I own some cryptocurrencies, I do not receive compensation for my writing and I have no business relationship with any of the companies mentioned in above article. In addition, I am not an investment advisor and above article is for purely informational purposes. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.
Bryan, a Singapore PR, has spent two separate stints in Singapore, spanning close to two decades. As is the case for most non-techies, although Bryan's first exposure to Bitcoin was around 2010, it wasn't love at first sight. However, Bitcoin's impressive resilience, meteoric rise and world-changing potential have converted Bryan, to the extent that he has now pivoted to fully commit to Bitcoin.
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