There are many posts, essays, and papers critical of Bitcoin out there, but they are unfortunately drowned out by the sheer number of pro-Bitcoin rhetoric. Recently, they have only seemed to increase in volume. The recent new all-time high probably intensified it and even caused me to look into it. Thankfully, I did not fall to the trap, and I now realize it is a purely speculative asset. The entire hope when buying Bitcoin is hoping that another fool will buy it at a higher price. Of course, it can theoretically become a non-speculative asset, if it is actually used as money and stabilizes. Unfortunately for Bitcoin, I do not see it (or any cryptocurrency) being preferred to the U.S. dollar or other world currencies.
What is money?🔗
The concept of money can occasionally be hard to define, but the International Monetary Fund (IMF) provides a succinct definition:
money is something that holds its value over time, can be easily translated into prices, and is widely accepted.
It is also safe to say the IMF knows what they are talking about.
Does Bitcoin fit?🔗
That definition has three different parts, all requirements, for money.
money is something that holds its value over time
This is the concept of a "store of value." With fiat currencies, or at least well-run ones, it is understood that they slowly lose value over time due to inflation. Their purchasing power slowly and predictably declines. When payed in dollars (or euros, pounds, etc.) I do not have to spend them right away. With Bitcoin, the chart is all over the place. Think about this: would anyone give a loan in BTC? Of course not.
Furthermore, something like gold has other uses and is pretty. In the worst case scenario, it does not need internet access to use either! The same cannot be said about Bitcoin.
can be easily translated into prices
This is the requirement to serve as a "unit of account." In the U.S., everything is priced in dollars as it is a good unit of measurement for that. As seen with the BTC/USD chart, Bitcoin is far too volatile. Nothing is ever priced in BTC, except the occasional charts comparing other cryptocurrencies. If I told you a water bottle was $30 eight years ago, it would be roughly the same amount. $30 would still make sense to you. Now, if I said it was 0.5 BTC (for sake of argument), that would mean something different every week with extreme fluctuations!
is widely accepted
Finally, money has to act as a "medium of exchange." It has to actually be used to buy and sell items. Despite over a decade of Bitcoin and many well-funded startups, I cannot use Bitcoin to buy anything (except paying ransom!). Practically every merchant will not allow you to pay in Bitcoin (or any cryptocurrency for that matter), and for the tiny percentage that do accept cryptocurrencies, they are usually converted to dollars or the local currency as soon as possible because they do not want to hold it either.
So why do vendors not accept Bitcoin?🔗
Well, because they cannot use it either and for the other two reasons, Bitcoin is both a terrible store of value and unit of account. But wait, there's more! Bitcoin is horribly inefficient to use. Due to the Bitcoin block size, which previous proposals to adjustment split the community, Bitcoin has a theoretical maximum of processing just seven transactions per second. That is nothing, especially compared to Visa's maximum of 47,000 transactions a second.
Also, cryptocurrencies are a hassle to keep secure. To truly have control over your crypto, you need control over your keys. Therefore, any type of custodial or exchange-provided wallet does not suffice. For good reason too, as exchanges get hacked all the time.
Note on limited supply🔗
By far one of the most touted features is the limited supply of Bitcoin. Only 21 million can ever exist. Not only that, but since Bitcoins are frequently "lost" (as in, people lose access to their keys), the supply decreases. Bitcoin is a deflationary currency. I do not see how this is a benefit. This will only encourage people to hold, rather than spend, unlike inflationary currency (e.g., almost all currency in the world). Sure it can be divided in to many pieces, but the supply still does not change.
Does this mean Bitcoin will not go up in price? No, I have no idea, but as I stated it is a speculative asset, thus should be avoided. I also understand the niche and potential use-cases of having to avoid the government (such as an autocratic regime), but at that point, maybe just use Monero? Finally, if there is something wrong or you want to discuss reach out to me, thanks! Always happy to hear another opinion.