Cryptocurrency is a whole new world of investment, and who knows what more can be its uses? But there are rumours about the failure of bitcoins. Yes, you heard it right. And how much those rumours are true, we will know in this post. Cryptocurrency is making several of its users, millionaires, and investors are now investing more in bitcoins than any other investment source. Oops! What we just said, bitcoins?
Well, this mistake is done intentionally to clear the meaning of cryptocurrencies and bitcoins. Many people use these two terms interchangeably, but in reality, they are not. Yes, when we say cryptocurrency we mean all the digital currency present in the digital world. But bitcoin is just one of them. The various cryptocurrency that is present for you to invest in is Bitcoin, Dogecoin, Tether, Ethereum, litecoin, Tether, and many more. Bitcoin is the first cryptocurrency and maybe that’s why most people get confused and take them both as synonyms. But this is not true as we said earlier.
Cryptocurrency is a much wider term than that of bitcoin. And when the question arises that why Bitcoin will fail, do not think that cryptocurrency will fail. Because they both are different.
Cryptocurrency goes through phases of ups and downs like every national currency or fiat currency. Because these are the currencies that are the biggest investment sources at present, they face more swings than any other currencies. Bitcoin, even though it was the first cryptocurrency, has gone through several falls since it was born in 2009. And not only this, Dogecoin, another cryptocurrency, faces a sharper fall than Bitcoin in the market. But still, these currencies have the potential to come back into the market and grow more than previous rates.
Reasons why Bitcoin will fail.
Most of the reasons that Bitcoin will fail are associated with its not being fiat money or national currency. Let them learn in detail.
- No stabilizing force
Bitcoin has no stabilising force to maintain its stock and its movability in the market. And if we talk about the national currency, it has a government authorised body that controls the flow of currency in the nation and market. Governments issues the national currency, so are highly trusted. And they enter into the international monetary market to do market operations, that is buying and selling of currency. But with Bitcoin, the same does not happen. You don’t use your Bitcoin to purchase any material things from the market, instead, you put it safely in your digital wallet. Investors don’t go paying for things in Bitcoins thinking its value will rise in the near future. And the same goes for the vendors as they stop accepting Bitcoin when there is a slight decrease in its value. That’s why Bitcoin fails as a currency, no matter if it’s a digital one.
- Bitcoin investment is different from blockchain investment
Bitcoin is not backed up by any real assets, that’s why the change in its value is not measurable and predictable. But there are some cryptocurrencies that are called stablecoins that can be backed up by real assets. The benefit of these coins is that a change in their value is always the same as the change in the backed-up asset value. So, Bitcoin has less blockchain tech than that stablecoins. And why go with bitcoins when we can have other cryptocurrencies that have better blockchain tech.
- Bitcoin lacks real value
Bitcoin does not have any real value as Fiat money does. Fiat money is exchangeable for every kind of money but with Bitcoin, situations are different. The real value can be defined as when government guarantee its people that they can buy any physical and non-physical thing worth the amount that is printed on currency. Both are exchangeable if they have the same value. For example, $1 goods are exchangeable with $1 worth of currency. The currency of the US carries the word “legal tender” in it, making it clear that the money has the same value. Even stock has real value in the market but not Bitcoins. Stock’s real value depends upon the company’s ability to create profits from the sale purchase of goods and services. But Bitcoins have only one value that the buyer wants to pay for them.
- Still a dream of replacing the national currency
The national currency is not that easy to replace. They say Bitcoin is in competition with the national currency but could it be possible. Bitcoin lacks many features that national currency has. And those features are the main reasons why Bitcoin can never replace the national currency. First of all, to replace the national currency, it needs to get the approval of the government. But countries like China are banning Bitcoin trading. So, the scenario is the opposite and one can not be sure that this would happen in near future at least.
- Not suitable in the long run
Bitcoin has gained momentum in COVID when most other investments were going down. The rise was just to combat COVID by the government through their fiscal and monetary policies. Good liquidity in the market was needed to settle down and the rise in cryptocurrency value become the solution. But in long run, this situation will vary and Bitcoin may rise or fall.
So it will be wrong to say that Bitcoin is too big to fail. Cryptocurrency like Bitcoin faces huge ups and downs in the market and does not guarantee high value always. Bitcoin has seen a huge rise and no doubt there were some big falls too. But just because it’s the first cryptocurrency does not mean it will not fail ever. So make your investment by having a thorough investigation first.