Can Bitcoin go bankrupt / fail?
The future of Bitcoin is still uncertain. However, as an enthusiastic investor, you probably want to know whether Bitcoin has a bright future ahead. In this article, we will therefore examine whether Bitcoin can fail.
Can Bitcoin fail?
Yes, Bitcoin can fail. In fact, there is a pretty good chance that Bitcoin could fail in the future. Compared to other cryptocurrencies, Bitcoin is not that good.
The cryptocurrency market is similar to the situation on the internet in the 90s. The underlying technology, blockchain, is incredibly promising and will remain. Cryptocurrencies will also become increasingly popular. But will Bitcoin remain THE cryptocurrency? That is the question…
In this article, we will discuss various reasons why Bitcoin could go bankrupt in the future. It is important to keep an eye on developments: that way, you can avoid losing a substantial amount with your long-term investment in Bitcoin.
After the rise of the internet, many revolutionary companies did not survive after 2001.
Problem 1: no underlying value
A big problem with Bitcoin is that there is no underlying value. When you buy a share, you know what is behind it. As a shareholder, you are a co-owner of the company, and in many cases, you even get a share of the profit in the form of dividends.
Even when you own traditional fiat currency, there is value behind it. The government supports these currencies.
With Bitcoin, however, it is different: the price is determined entirely by what someone else is willing to pay for it. However, you can do very little with bitcoins in the real world. If people no longer want the currency, the price can drop significantly, and the currency will fail.
Problem 2: no stabilizing effect
Many Bitcoin enthusiasts are happy with the limited government intervention when it comes to Bitcoin. They argue that this makes it possible to be completely in charge of your money without another party being able to influence your transactions.
On paper, this is positive, but it also adds a risk to Bitcoin. There is no stabilizing factor, which makes the cryptocurrency unusable as money at the moment.
The government uses various instruments to keep the euro as stable as possible, which makes it reliable for buying and selling goods. Bitcoin is highly volatile, precisely because of a lack of stabilizing. Therefore, we are unlikely to see products with price tags in bitcoins anytime soon.
Problem 3: political pressure
Another reason why Bitcoin could fail is political pressure. Bitcoin is in competition with national currencies such as the euro and the dollar. But how likely is it that central banks will abandon their own currencies and suddenly switch to Bitcoin?
Governments love control; to a certain extent, this is even necessary in order to collect taxes. It is therefore more likely that countries will introduce their own cryptocurrencies as Bitcoin becomes more popular. This could be a reason for Bitcoin to fail and collapse.
Problem 4: Limited Scalability
Another problem with Bitcoin is its limited scalability. Within the consensus algorithm used, more computing power is needed to add a block. The entire blockchain also becomes larger. As a result, the number of parties involved in mining decreases, which makes the currency actually more centralized.
You can also see the consequences of limited scalability in payment speed. Visa can handle thousands of transactions per second, while Bitcoin remains stuck at about 8 transactions. This clearly hinders the growth and future of Bitcoin and can lead to the demise of the currency.
Problem 5: Not a Sustainable Currency
Another issue with Bitcoin is that it is anything but sustainable. This is because a large group of miners constantly use a lot of computing power to approve transactions. This of course requires a lot of energy. Some of this energy comes from sustainable sources, but a lot of fossil fuels are also burned.
At a time when climate issues become increasingly central, this is of course a major problem. For example, Elon Musk decided to stop accepting payments in Bitcoin due to sustainability issues. When more and more parties turn their backs on Bitcoin, the cryptocurrency can certainly fail.
Problem 6: Security Issues
A final, major issue with Bitcoin are the security issues. Bitcoin will only be widely embraced when it is as secure as our current banking system. However, hackers still regularly crack exchanges, causing customers to lose their entire balances. In addition, transactions are irreversible, which makes fraud more difficult to remedy. This seems to be another argument for Bitcoin’s potential failure and bankruptcy.
What is the future of Bitcoin?
To predict the future of Bitcoin, we must address the concerns on different time scales. In the near future, anything can happen: this is because Bitcoin mainly has value because many people speculate in it. They believe that Bitcoin is the future and other cryptocurrencies are not yet so well-known. Therefore, Bitcoin can still easily multiply in value.
However, I do not think that Bitcoin is the currency of the future. Bitcoin is more like Myspace of social networks: it is a nice start, but not the dominant player. The cryptocurrency of the future may be a currency that we do not yet know. A cryptocurrency that is more sustainable, faster, and safer than Bitcoin.
This does not seem like an unrealistic situation, as there are already enough cryptocurrencies that are superior to Bitcoin. The only thing Bitcoin has going for it is that it was the first.
Frequently Asked Questions
It seems unlikely that Bitcoin will completely disappear. Even if the price drops significantly, there will still be people who are willing to pay at least a small amount for Bitcoin. However, Bitcoin can lose its dominant position if the masses embrace a better alternative.
Governments are closely monitoring Bitcoin. This is not surprising, considering that the anonymity of the currency makes it easier to hide your money or engage in criminal activities. Some governments have already banned Bitcoin.
It is hard to fully ban Bitcoin, since it is a decentral digital currency. Nevertheless, the government can limit the trading possibilities of cryptocurrencies. They can do this by imposing the same requirements on crypto exchanges as on banks.
Absolutely, Bitcoin will also regularly collapse. For example, in 2018, the price dropped by 82% and in 2021, the price dropped by 50%. Since the launch of Bitcoin, its price has constantly collapsed.
Are you wondering whether the Bitcoin price can permanently collapse? I can also see this happening at some point. If another cryptocurrency takes over, Bitcoin can permanently decline in value.
Bitcoin itself is very difficult to hack. Until the arrival of quantum computers, I do not see this happening. Only if one party takes over 51% of the network, it will be possible to hack Bitcoin.
However, this does not mean that YOUR Bitcoins cannot be hacked. Therefore, secure your Bitcoins well and take sufficient precautions. You can read more details on how to safely buy & sell Bitcoins in this article.
