Well, well, well, look who’s back in the limelight again – Cryptocurrency! It feels like 2021 isn’t it? Just when you thought it was safe to go back in the investment waters, the crypto craze has surged back into the scene, dragging up crypto prices skywards! You can almost feel the market paving the path for another bull run. Yet, isn’t it amusing how despite all this hoopla, we still have seasoned investors and cautious bystanders debating whether cryptocurrencies are anything more than wild unicorns with shiny horns?
Bitcoin: The Read Deal or a High-Stakes Gamble?
Say hello to our old friend Bitcoin, once again taking centre stage in this year’s crypto theatre. The ultimate digital star, having blazed past records in March, now struts around with a staggering price tag of $73,750. Bitcoin ETFs approval by our SEC buddies and the excitement brewing for the upcoming bitcoin halving event – a fancy way of saying new bitcoins are going to get even more scarce – have helped catapult Bitcoin into the stratosphere. Investors, I see you rubbing your hands in glee, hoping this event will trigger another price rally.
However, despite Bitcoin flexing its muscles and smashing through the glass ceiling, there’s one hurdle holding it back from joining the elites — its real-world utility. Imagine owning a shiny BMW you can’t actually drive to the supermarket for groceries – that’s Bitcoin for you, more valuable than some premium vehicles but with a rather lacking repertoire of everyday uses.
Is Bitcoin Really Money?
Pop the Bitcoin birth year of 2009 into the way back machine, and we find Satoshi Nakamoto introducing it as a potential game-changer. Offering an alternative to the traditional fiat currencies like the good ol’ U.S. dollar, Bitcoin promised secure and transparent transactions through its underlying blockchain technology. Like a snowball getting bigger and bigger as it rolls down the hill, Bitcoin’s liquidity also promised to increase over time.
Fast-forward to the present day and our perceptions of Bitcoin’s purpose have shifted. Remember the “Bitcoin pizza” event when a couple of pizzas stupidly sold for an eye-watering 10,000 BTC in 2010? Well, if we overlook the indigestion it caused, it does highlight a curiosity; Bitcoin, previously branded as a form of digital money, is now often seen as a store of value like gold. But rather than a glistening metal, Bitcoin’s appeal comes from its scarcity.
Bulls and Bears Both Question Bitcoin’s Currency Potential
The crystal ball is a little hazy when it comes to Bitcoin’s future as a currency. Economists and crypto professionals seem divided, but even they can’t deny one glaring truth: the big B may never serve as a mainstream currency. Now, let’s not burn our bridges here. It’s not as if Bitcoin is invaluable. Far from it! The disagreement seems to stem from whether these shortcomings actually matter.
Take Dr. Bob Johnson, an economics guru from Creighton University. He doesn’t mince words when it comes to Bitcoin’s value luggage. According to him, Bitcoin lacks fundamental support. Sure, Bitcoin is high on charm, but without wide-scale adoption and official recognition, it’s like a Hollywood star without an Oscar. Leinweber, another expert, holds a similar view. He acknowledges Bitcoin would need a miracle to serve as an everyday currency, given its high volatility and transaction fees. But does that actually matter? Maybe not.
Does It Matter If Bitcoin Never Becomes a Currency?
‘To be or not to be a currency, that is the question?’ Even though Johnson harbours doubts about Bitcoin’s currency potential, Leinweber views it in a different light. According to him, Bitcoin might actually serve us better as a ‘digital alternative to gold’, a go-to haven during economic instability.
Couple these revelations with innovative solutions such as stablecoins, and Bitcoin’s utility becomes less of an issue. Some like it hot, some like it cold, but most agree that Bitcoin, for all its glitter, no longer aims to elbow its way into the currency club.
El Salvador’s Bitcoin Beach may be setting trends in crypto payments. Still, the rest of the world needs convincing. The raging debate continues: Are Bitcoin’s characteristics enough to justify its eyebrow-raising price, or are we dealing with another case of ‘tulip mania’, a speculative bubble waiting to burst? We do know one thing for sure: Bitcoin won’t imitate the dollar or euro anytime soon. But whether that matters to its valuation, well, that’s where the plot thickens.