Bitcoin: Future or Failure?


2/7/18 – Looks like I was ahead of the market as usual and my original predictions have come true. Bitcoin isn’t out completely though. The tech behind it is a definite game changer, but the wild west gold rush-esque days look to be behind us. Going to be keeping an eye on crypto over the next few years. The first one to get it right and establish a stable (read not willing to sell) base will be a chance for many to make a fortune.

12/15/17 – Man, I was wrong about this one. Haha. I still believe the large fluctuations make this untenable as a currency, and I still believe a large amount of the value is due to speculation and people using bitcoin as an investment to avoid paying capital gains taxes. Regardless of that, it sure has been one hell of any investment for those that got into it. Ah well, if world-renowned economists and the greatest businessman to ever live (Buffet) are doubters as well, I don’t feel that bad about my prediction being wrong. Anyway, below is my original article without any edits made due to current events/price.

These days you can’t read any tech or financial news without seeing “Bitcoin” or “Ethereum” in every other headline. I’ve always doubted the long term solvency of these so called cryptocurrencies, but I could never put into words why because my doubts were based on gut instinct, not research. Realizing this, I decided to educate myself on what Bitcoin is, what the purpose of Bitcoin mining is, and how sustainable and scalable this articulation of cryptocurrency is. In doing so, I came upon the following article which provides a very logical analysis of the seemingly insurmountable challenges Bitcoin will need to overcome if it is to remain a major player in the currency market.

Nothing is certain and I could be wrong, but technology and sustainability aside the biggest problem that I see with investing in Bitcoin is the emotion of its users and promoters. People praise it for being “decentralized” and “unregulated by the government” without understanding what they are talking about. That, my friends, is the sign of a mania. Guess what? 80% of your production (mining) in one country (China), does not make your currency decentralized. Furthermore, the idea that you can simply exclude the governments of the world from tampering with your finances is a pipe dream. The simplest example that I can think of is this: bitcoin takes electricity to mine, lots of electricity. Who ultimately controls utility rates? The government. Who could sky-rocket the cost of electricity through new environmental regulations or any number of other measures, policies, or trade restrictions? The government. The low electricity rate in China is the very reason that most of the mining is done there and proves how dependent Bitcoin is on that factor. That doesn’t seem very unregulated to me.

Regardless of your opinion of the tech, you should know above all that Bitcoin is a HIGHLY speculative investment and if you aren’t in it yet the odds favor you being late to the party, buying high, and selling low.

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