Cryptocurrencies, especially Bitcoin, is turning out to be more and more valuable as the days go by. In fact, many believe that it has turned out to be more like ‘New Gold’ than a normal currency.
“Bitcoin transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions. … By the time the transaction is confirmed, fluctuations in Bitcoin price mean that it’s for the “wrong” amount. … Furthermore, fees have risen a great deal … making Bitcoin transactions about as expensive as bank wires.”
Also, a Bitcoin conference, held in Miami, refused Bitcoin as attendance fees.
Reasons why Bitcoin isn’t a currency –
- This currency is slow and laborious due to verification of each block.
- Relies on miners for the verification of transactions.
- Fluctuation of value in short term (Short-term Volatility)
The first reason could be avoided by using bigger blocks, whereas the second reason can be avoided as transaction fee will be needed in order to pay the miners.
The third reason is basically why the workers are paid in US dollars. Dollars are terrible long-term stores of value since they depreciate at the rate of inflation, which is about 2 % a year. But since that rate is actually very steady, hence it is predictable, i.e. you know how much you’re paying and getting paid.
Thus, clearly, cryptocurrencies are not deemed as actual currencies, excluding for those cannot use the normal form of money, such as drug dealers. But when it comes to cryptocurrencies being a good investment, well few can indeed be good investments whose values could also increase eventually. Yet there are few which turn out to be scams or the ones whose value drastically reduces or sometimes completely forgotten.
That is exactly why Bitcoin is considered as an equivalent to gold, as a similar phenomenon occurred with gold.
Legendary investor Warren Buffett once ridiculed gold for being an unproductive asset, but the price of the yellow metal has climbed over time.
More Insight –
Why is Bitcoin considered equal to Gold?
Gold, as mentioned earlier, faced similar questions like Bitcoin, but there were 2 main reasons as to why gold prices increased –
- It’s not useless, i.e. it’s used as jewelry, for industrial applications, etc. which leads to it going out in circulation and thus increasing its scarcity.
- People believed in it, i.e. many considered fiat currencies would collapse and hence gold ended up being more in value.
Hence, in the same manner, Cryptocurrencies like Bitcoin may never go to zero as they are much like gold which represents a belief that fiat currencies would collapse.
Thus resulting in such Cryptocurrencies is being considered as a good replacement.