Welcome to the world of crypto-currencies!
Since you have landed on this page; you either have already invested in one of the crypto-currencies out there in the market or want to invest in such currencies. But looking for some convincing reasons to make an investment. Welcome to the world of crypto-currencies – an industry ruled by greed, fear, and speculations!
Do Bitcoin have a bright future?
You must be thinking do crypto-currencies have a bright future? The answer is YES. Do Bitcoin have a brighter future? In my opinion, the answer is NO.
Why ‘crypto-currency’ may succeed and Bitcoin may fail?
When some disruptive technology comes, it goes through four stages of development. The crypto-currencies are still in their first stage of development. People are yet to understand what they are investing in? People think crypto-currency is the evolution of money starting from barter system. But the fact is; not all crypto-currency is money.
Bitcoin is an innovative payment network and a new kind of money. This means Bitcoin claims itself as a new kind of money and it intends to carry a value. Say Bitcoin is like Dollar.
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, and fraud or third-party interference. This means Ethereum acts as a platform on which other Apps can be build which may run smart contracts. Say Ethereum is like Android.
XRP is the Digital Asset for Payments. It’s the fastest and most scalable digital asset, enabling real-time global payments anywhere in the world. This means Ripple is actually a payment system. Say Ripple is like RTGS (Real-time Gross Settlement).
People have been loosely referring all these ‘crypto-currencies’ as digital money (currency) which may buy stuffs for them. But in the real sense, only Bitcoin (and similar coins, i.e., Litecoin) is the crypto-currency that may be used as money. And, here comes the real challenge – popularizing a piece of code as money without any institutional support, backing or guarantor.
A piece of code as a platform may succeed without backing. Open source projects like Linux are live example. Therefore, Ethereum can also be successful in future. A piece of code can succeed as a Payment system. Net Banking is a live example. Therefore, XRP can also be successful in future. But, a piece of code as money is really really tough dream.
Evolution of money: Barter System > Metal Coins > Paper Money > Plastic Card > Crypto-currency
In ancient time commodity itself was the real money (wealth). One commodity could be exchanged with another one. For example, if someone needed materials to construct a house, they could get them in exchange for some oxen. As civilization grew we needed a type of money that could be easily carried and divided into fractions. We started to use precious metals like gold and silver as a form of money. Gold and silver found their backing from its ‘limited availability’ and ‘hard to extract’ process. Then come the paper money (Fiat currencies) backed by governments. Now-a-days plastic money rules the market. These are backed by banks and other financial institutions.
Bitcoin may fail as an evolution of money as they are backed by none but the people: creators, investors, and coin hodlers.
Creators are being greedy.
There are many reasons that I believe will cause the Bitcoin and similar alt-coins to ultimately fail in future. One reason is people themselves who created them. The creators of crypto-currencies have been claiming their currencies are decentralized, open source and based on blockchain technology. Thus the main intent claimed for these currencies is to by-pass central banks and their manipulations.
But due to the fact that the major chunks of these coins are being held by the creators itself, the creators themselves are acting as central banks. This mean creators have the intent of making huge money once their coins are bought by common investors like you and me. So, in this case, the creators themselves are acting as central banks. They are being greedy.
Investors pouring-in money based on speculations.
Warren Buffet has repeatedly said that he finds no value in Bitcoin. He might be wrong about all the crypto-currencies but right about Bitcoin. Other investors also share the similar views. “Bitcoin is a fraud that will blow up”, says JP Morgan boss. Similarly, Joseph Stiglitz a Nobel Prize-winning economist says, “Bitcoin Should be Banned”.
On the other hand, there are some investors who believe that Bitcoin would succeed. Virgin Group founder and billionaire entrepreneur Sir Richard Branson is a huge supporter of blockchain technology. While talking to the press on October 3, Branson said the tech could bring an “economic revolution” to many nations worldwide. Bill Gates once said Bitcoin Is ‘Better than Currency’. But all these famous people who have shown their support for Bitcoin has not made any investment in Bitcoin.
The people like Cameron Winklevoss and Tyler Winklevoss have done investments in Bitcoin speculating great returns. Barry Silbert the Chief Executive Officer and founder of Digital Currency Group. His company’s mission is to support and invest in Bitcoin and blockchain companies. There are many ‘coin hodlers’ also dreaming of getting rich one day. These are those investors who think crypto-currencies of today are Google and Microsoft of tomorrow. These investors are pouring-in money based on speculations.
Negative news in market and Boom!
You would find no other graph in a market which varies so much so fast than price fluctuations of cypto-currencies tokens. These types of variations are only seen in share markets during crashes or recessions. But in case of crypto-currencies, you get to see this behavior every now and then.
As the strength of these coins lies in ‘community trust’ and people keep reacting on negative news (and people will do) one cannot stabilize the price fluctuations of these coins. Hence, large dents and ups in the graph are simply not acceptable for using them as the medium of exchange (currency). Since the strongest pillar in crypto-currency is the people, if they don’t trust their own currency, these currencies would never fly. The people will always be fearful, the crypto-currencies will keep struggling.
The advent of Government-backed crypto-currencies.
Venezuela has recently announced the petrol backed ‘Petro’ coin as part of their crypto-currency development and economic independence. Similarly, Russia announced their own crypto-currency dubbed the Cryptoruble. According to a report, Reliance Jio Infocomm of India is drawing up plans to create its own crypto currency, Jio Coin. Some other nations are also planning to launch their own such crypto currencies. If these plans succeed then Bitcoin may further drop from its current valuation.
As of writing the price of bitcoin is $8487.52 down from over $19000 in December, 2017. Furthermore, if government backed crypto-currencies gain common acceptance then the idea of having central bank independent de-centralized global currency will remain a dream for some more years.