Only a few hours ago, The Motley Fool has posted an article in an attempt to gather as many arguments against Bitcoin as possible - without even realizing how pathetic most of them really sound. This further proves that, besides the "money laundering" already tiring and annoying attack against BTC, there isn't really much negative stuff one could say about the King of crypto.
As TMF has partnerships with some of the top financial news outlets,
their article has already appeared not only on their website but also on
MSN,
Nasdaq and so on.
I thought this is such a stinky and disgusting attempt to stain our cryptocurrency's reputation, so.. as a result, I strongly wanted to argue against the author's points. Let's begin.
But as good as bitcoin has been for investors in 2020, my blunt opinion is that it's a terrible investment. Here are 10 reasons you should avoid bitcoin like the plague.
Well, here's the fun part: it's not been a great investment
just in 2020. besides a short timespan during which Bitcoin has standed above $11k, we have more than an entire
decade of profitable investment. Whoever bought at literally any given time between 2009 and 2020, with the exception of a few months (the crazy 2017 bull run and this year's top levels) and still hodls today is
on profit. Let's see if the next 10 arguments stand strong.
1. Bitcoin isn't really scarce
First of all, bitcoin is only as scarce as its programming dictates. Whereas physical metals, such as gold, are limited to what can be mined from the earth, bitcoin's token count is limited by computer programming. It's not out of the question that programmers, with overwhelming community support, could choose to increase bitcoin's token limit at some point in the future. Thus, bitcoin offers the perception of scarcity without actually being scarce.
Funny how the negative argument about Bitcoin's idea of scarcity easily turns into a very positive side.
That's right: with
overwhelming community support, we could change Bitcoin's total supply. But
overwhelming community support requires a very strong, justified reason to do so. Putting it another way,
we will only change the total supply if it's a mandatory, vital change for Bitcoin to continue to exist.
The "digital mining" vs "gold is limited to what can be mined from the earth" point quickly falls short when you think we aren't very far away from
sending asteroid-mining robots in space. According to
U.S. Money Reserve,
"about 244,000 metric tons of gold has been discovered" on Earth until today. However,
"There may be more gold to mine, but no one can be sure how much gold is left or how hard it will be to dig up.".
Back to the outer space, TMF may be surprised to find out that
there is an asteroid containing $700,000,000,000,000,000,000 worth of assets, mainly composed out of metal -
"including iron, nickel, and gold" exists.
Hence, if we're talking about physical vs digital scarcity, more physical gold than ever before could be found at any given time -
or scientists could even find a way to create unlimited gold as science and tech advances. Meanwhile, Bitcoin's supply remains capped at an exact amount. Thank you, math for making this possible.
2. It has a utility problem
The king of cryptocurrencies also has a utility problem. To date, only 18.51 million bitcoin tokens are in circulation, with an estimated 40% of these held by small group of investors. Even considering the fact that fractional token ownership exists, roughly 10 million to 11 million tokens in circulation aren't going to go very far. For context, global gross domestic product was $81 trillion in 2017. Meanwhile, bitcoin has approximately $114 billion to $125 billion in tokens freely circulating and not held tight by investors. There's minimal utility here.
Is it that of a big surprise if I told you wealth inequality exists and, before we take a look at Bitcoin,
the top 1% of the richest owns around 50% of the global wealth (and keep in mind this was
before the pandemic - now the richest are worth
more than $800B more)?
Bitcoin's "small group of investors" holding a significant part of the circulating supply are actually exchanges and services. I'm not sure how utility isn't there with such a huge list of shops, Bitcoin-filled debit cards,
more than 11k ATMs and 212k vendors in existence and so many other options of using or storing Bitcoin available.
The GWP was actually
$80.27 trillion in 2017 - and it took 4 years to grow from
2013's level of $75.59 trillion. I.e. it took 4 years to grow by only around 8%. Let's take Bitcoin's numbers from 2013 vs 2017 now:
-
2013 Market Cap (26th of Apr): $1,488,566,972
-
2017 Market Cap (30st of Apr): $21,975,158,882
-
2020 Market Cap (26th of Apr): $140,903,867,573
Say what?
3. There's a low barrier to entry
Bitcoin may enjoy first-mover advantage at the moment, but the barrier to entry in the cryptocurrency space is especially low. All it takes is time and coding knowledge for blockchain -- the digital and decentralized ledger that records transactions -- to be developed and a digital token to be tethered to the network. There's nothing unique about bitcoin's underlying blockchain that other businesses couldn't one-up.
This argument really doesn't make sense.. Yeah, the barrier is low - it's called
freedom,
decentralization and
open-source. A kid who has enough coding skills or the capacity of following a YouTube tutorial could create his own version of cryptocurrency. We're free to do so - what's so wrong with that?
Bitcoin is the 1st of all cryptocurrencies. It's the spark of the crypto world, and that will always keep it standing. Other projects may actually represent
testing lands for Bitcoin's future updates. Once a new feature proves to be successful with other cryptocurrencies and the community expresses a strong support for it, Bitcoin will adopt it.
4. Few (if any) tangible means to value bitcoin
Another beef with bitcoin is that there's no tangible way to value it as an asset. For instance, if you want to buy shares of a publicly traded company, you can scour income statements, its balance sheet, read about industrywide catalysts, and listen to management commentary from recent conference calls and presentations. In other words, you can make an informed decision.
With bitcoin, there is no tangible data for investors to wrap their hands around. There's transaction settlement times and total circulating token supply, but neither of these figures tells us anything about the value or utility of bitcoin.
Bitcoin gives you the freedom to do your own research probably better than any other publicly traded company in the world could. As it's fully decentralized, there is data about literally everything, everywhere. You could simply use the publicly-available information stored in the blockchain at any given time and do your own analysis. It's one of Bitcoin's most beautiful aspects. There's no cheating, no fraud - all information is transparent and free.
Besides my above argument, are all stocks priced at their real value at all times?
Are they really?
5. Fiat currencies may work on blockchain
I believe investors are also placing their faith in the wrong asset. Over the long term, blockchain technology is where the real value lies. Blockchain can be used to reinvent supply-chain management and expedite overseas payments. But when folks are buying into bitcoin, they're gaining ownership in digital tokens with zero ownership of the underlying blockchain.
To build on this point, companies are also testing blockchain that's tethered to fiat currencies. For example, Mastercard (NYSE:MA) was awarded a patent in July 2018 "for linkage of blockchain-based assets to fiat currency amounts." This implies there may not be any need for a made-up digital token to be used at all on blockchain networks.
So how does this make Bitcoin a "terrible investment" in any kind of way? Digital fiat currencies will only be the currently existing fiat, but
extremely worse from a privacy perspective. Going to your 4th argument, this is one of the big reasons why Bitcoin will
always have a value. Learn to value privacy.
6. Blockchain is years from being mainstream
A sixth issue is that blockchain is still years away from gaining real relevance. Three years ago, when blockchain companies and cryptocurrency stocks were the hottest thing since sliced bread, it was expected that blockchain technology would be quickly adopted. Little did investors foresee the Catch-22 that would arise. Specifically, no businesses are willing to make the costly and time-consuming switch to blockchain without the technology being broadly tested -- yet companies aren't willing to make this initial leap to test the technology and prove its scalability.
In short, blockchain is years away from being a mainstream technology.
It's years away from being mainstream, but OP is admitting himself that it
will be mainstream soon. So, is being an early investor nowadays a "terrible" choice? I thought it was the opposite.
Jokes aside, this one doesn't even have to be explained. Expecting cryptocurrency to be "quickly adopted" is a very unrealistic thing anyway - it's a technology that is only
one decade old, and only in the last few years did it start to become more heard about. Huge names are already using Bitcoin on their platforms - and guess what!
U.S. Space Force is going to use blockchain tech to protect their data. It looks like it's going to be used anyway, be it tomorrow or within years.
It's the future.
7. Fraud/theft is a serious issue
By no means are cryptocurrencies the only asset to be hacked by thieves, but there are serious fraud and theft concerns that accompany bitcoin. For instance, novice bitcoin investors may not understand the need to store their tokens in a digital wallet, thereby leaving them susceptible to theft by hackers.
Additionally, it's been hypothesized by numerous blogs and publications that North Korea has turned to bitcoin mining and theft to funnel money into its isolated economy. Bitcoin is commonly viewed as the "currency" of choice for criminal organizations.
So are we going to blame Bitcoin because some people store millions in their centralized exchange accounts practicing shit security when they could simply store them in decentralized wallets instead?
I am honestly sick of the "Bitcoin is the choice of criminal organizations" stupid idea. It cannot even compare to the fiat crimes and money laundering figures. Banks
have moved $2,000,000,000,000 in illicit transactions, yet we're naming Bitcoin the Criminal's Choice.
Let's be 100% honest: if you were to commit a crime, would you choose cash which is
not transparently recorded in a public ledger and requires no IP and extra cybersecurity or would you choose Bitcoin instead? Most criminals probably don't even know how Bitcoin really works..
8. There's no regulation
Bitcoin is also an unregulated asset. Though this lack of regulation is actually a selling point for today's crypto investors given that it provides some degree of anonymity, it's bad news if something ever goes wrong. Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen.
To be honest, it is kinda hard to properly regulate a technology that is open-source and international. It becomes even harder when you have a government that wants surveillance and control versus the community it wants to regulate, which wants freedom and privacy.
If the majority of the community wants Bitcoin to become more privacy-oriented and the US government doesn't like it, what happens? How do you adjust regulations for a decentralized currency that could be changed and used from any corner of the world?
Regulations are slowly coming to us though, and that is bad news. It's even worse than having interpretable laws actually, because the governments will want to focus more on surveillance than on privacy. The sad thing is, I do not think there is any way they could regulate Bitcoin so that everyone is happy. It'll probably be either privacy or control.
9. The tax situation is a nightmare
If you think preparing your federal income taxes stinks now, try preparing them after investing in and/or using bitcoin in any transaction. The Internal Revenue Service expects you to report capital gains and losses tied to investment activity, as well as gains and losses associated with purchasing goods and services.
For example, if you bought a single bitcoin token at $11,000, then used a fraction of your bitcoin to buy a new smartphone for $1,000, you'd have to calculate the value of your bitcoin used at the time of the transaction and recognize capital gains or losses relative to your cost basis. It's a gigantic headache.
While this is one point I agree with, I strongly believe this has been done intentionally so that more people stay away from Bitcoin. If we had easy tax reports for cryptocurrencies, people would have been more attracted towards them. But when you know using BTC means a tax reporting nightmare, you may as well stay away from it.
Again, this is something that could change. It's not a non-changeable situation. It's just that not enough people complain.
10. All bubbles eventually burst
Last, but not least, all next-big-thing investment bubbles eventually burst. No matter how excited investors are about bitcoin and its underlying blockchain, history suggests it won't be enough to match lofty expectations.
Mind you, we've already witnessed multiple 80%-plus declines in bitcoin throughout its history. Extreme volatility is a given with digital currencies like bitcoin, and history would suggest that significant downside from its current price is a near certainty as well.
As time goes on and internet freedom decreases substantially, Bitcoin becomes more scarce (halvings + lost coins) and probably also more privacy-focused. Therefore, chances are it is not a bubble but
actually a still undervalued asset.
From 2011 to 2015,
silver price has had a decline of over 70%. From the lowest price in the past 5 years, today it's up around 100%. Bitcoin has managed to recover from all of its declines, except the ones I have mentioned in the beginning of my thread:
"(the crazy 2017 bull run and this year's top levels)". Moreover, as mentioned in my answer to OP's second argument against Bitcoin, Bitcoin's price and market cap has increased every few years by an impressive percentage.
Before ending this thread, I wanted to express a big "thank you" to everyone out there who is constantly fighting against malicious articles and statements, especially those that many times actually do have an influence, such as The Motley Fool's. Although I may not have as much influence as a news website has, this is an attempt to hopefully change the minds of those who took TMF's article for granted.
