Bitcoin was initially developed to work as a currency by a software engineer named Satoshi Nakamoto, who presented an idea of a centralized currency (which many would have thought can outplace fiat currencies) for the first time in 2009.
The Boom and Bust of Crypto Mania
Bitcoin and the rest of digital coins gained analysts’ and investors’ attention last year when Bitcoin’s price soared from $1,000 at the beginning of the year to an all-time high of $20,000 by the end of fiscal 2017.
It’s true that speculations related to institutional investments, bitcoin adoption, and the prospects of Bitcoin ETF’s had supported last year’s rally. But, it’s also unfair to discount illicit transactions that accounted for almost 44% of total trading volume.
The flagship cryptocurrency, however, started falling at a steady pace at the beginning of 2018, dragged down by warnings from financial watchdogs and criticism from renowned investors.
Prominent business experts and economists like Warren Buffett and Bill Gates had rejected the idea of virtual currencies; some of them call it a bubble while others believe it’s neither an investment nor a currency.
“If you buy something like bitcoin or some cryptocurrency, you don’t have anything that is producing anything. You’re just hoping the next guy pays more. And you only feel you’ll find the next guy to pay more if he thinks he’s going to find someone that’s going to pay more,” Warren Buffet says.
Lack of backing from real assets or fiat currencies also makes Bitcoin worthless; anyone can mine coins and sell them in a market for a certain price, analysts claim.
The enormous amount of price volatility has also been creating hurdles for Bitcoin to work as a viable medium of exchange. Bitcoin’s price has been making substantial price swings over the years. Its price plummeted more than 80% in the last eleven months of 2018 following a massive boom in fiscal 2017.
Businesses are Moving Away From Cryptocurrencies
Several merchants and big companies have stopped their consumers from buying products and services thorough cryptocurrencies.
Credit card companies such as Mastercard and Visa stopped their users from buying Bitcoin just after few months of approving it as a medium of exchange. This is only due to substantial price movements and a large number of scams associated with digital coins.
The CEO of MasterCard, Ajay Banga,
said, “I think cryptocurrency is junk. The idea of an anonymized currency produced by people who have to mine it, the value of which can fluctuate wildly – that to me is not the way that any medium of exchange deserves to be considered as a medium of exchange“.
Although several small online businesses are still accepting bitcoin as a viable payment method, the big companies, such as Stripe, backtracked from accepting digital coins. You can review the list of more than 200 businesses that still accept bitcoin
Stripe’s CEO blames transaction failure rates, significant increases in transaction confirmation times, price volatility, and fees for the failure of Bitcoin as a medium of exchange. “Empirically, there are fewer and fewer use cases for which accepting or paying with bitcoin makes sense,”
said Stripe’s CEO.
Bitcoin’s adoption as a medium of exchange has declined sharply since the start of 2018. Several factors, that are outlined above, have contributed to the failure of Bitcoin as a reliable medium of exchange; market experts are already talking about the death of digital currencies.