Bitcoin’s Ambitions Are Unattainable… but That’s OK
Let’s get real… Bitcoin isn’t a currency.
Not a real one. Not even a fake one.
I gave a vocal diatribe in the office the other morning, exclaiming that if you’re using bitcoin as a currency – to buy things or services – you’re an idiot.
You are dumb.
And you should hang your head in shame.
Why would you ever willingly spend something that was $600 in July 2016 that then shot to more than $15,000 by December 2017?
As of this writing, bitcoin has shot up 152% since November 12.
That’s the reality.
And no merchant or business can accept a form of payment that volatile. It makes no sense.
That’s why we’re starting to see companies dump bitcoin as a payment option.
Recently, the video game streaming service Steam announced it would no longer accept bitcoin. In April 2016, when the company announced it would begin using the cryptocurrency, bitcoin was trading around $450.
More importantly, transaction fees for bitcoin were a mere $0.20.
But as bitcoin’s value increased – and volatility picked up – the transaction fees increased 9,900%! That far outpaces the uptick in bitcoin’s price.
Let’s remember, bitcoin’s rise this year hasn’t been smooth. Just in the last couple of months, bitcoin has cratered quickly (and I’ve pointed out that you need to buy at the dips).
From June 10 to July 16, bitcoin slid 34.1%…
From September 1 to 14, its price fell 34.9%…
From November 8 to 12, the cryptocurrency tumbled 21.5%…
That’s unsustainable for a business – let alone a consumer – to accept as a form of payment. With all that volatility, there’s increased risk. And those increased fees are controlled by the merchants.
On top of this, we’ve all heard of the $21 million pizza debacle (though it’s exceptionally more than that now).
“Bitcoin Pizza Day” is celebrated in the cryptocurrency world. It’s a folklore tale that proves why bitcoin can’t succeed as a currency.
On May 22, 2010, Laszlo Hanyecz agreed to pay 10,000 bitcoins to have two large Papa John’s pizzas delivered to his house. It was a bad deal to begin with because the bitcoins were worth $41 at the time and the pizzas cost just $25.
A little more than seven years later, those 10,000 bitcoins are worth $147,635,200.
Hanyecz is the Ronald Wayne of the cryptocurrency world. For those not familiar, Wayne sold his 10% stake in Apple (Nasdaq: AAPL) for $800 in 1976. He’d be worth more than $75 billion today if he’d kept it.
Bitcoin is a fine investment – if you understand and fully appreciate the risks. But people that believe this is the future of commerce are misguided.
None of this is viable with the current volatility. A useful currency can’t gain 100% in a month or a week… and then lose 34% over the course of a couple of days. That goes for all cryptocurrencies.
If you’ve ever used bitcoin or another cryptocurrency to purchase anything, you are a fool. You’ve made a grievous error and have given up way more than you received.
If you’ve ever sold stuff in exchange for bitcoin, you are a genius.
That in and of itself isn’t a successful model for commerce. And that’s why to me, bitcoin will always be “digital gold.”
It’s a commodity – not a currency.
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