Bitcoin sparked an immense interest in virtual money systems and cryptic and anonymous banking. The industry has matured but the price is still volatile, too volatile for consumers?
This post was originally published at the height of the Bitcoin rally in late 2013 raising concerns over its longterm viability. Many / most issues have been addressed by now. Here are some notes on the recent price developments we’ve seen since early 2014.
Price Development / Update November 2014
The price has steadily deteriorated from it’s all-time high at $1,124 and is still very volatile. Bitcoin venture capital influx is high and still growing. Overall market cap of crypto-currencies is shrinking due to a bull stock market, a strong dollar and a massive stimulus from Japan. It is expected that more money will flow into stocks at the moment and Bitcoin may act similar to commodities such as silver and gold. Silver has reached a 5-year low and had a similar price deterioration. It is expected that once the stock market tumbles (possibly mid-late 2015) that commodities and Bitcoins will rise again. This could be a major turning point, because Bitcoin adoption will grow further and more infrastructure will be ready for mass-adoption by late 2015.
My current recommendation: Hold or sell parts of your investment. If we see $200 by mid 2015, an existing position could be increased. Prices may turn around as soon as the dollar weakens. Because the FED may increase interest rates, this won’t happen too soon.
Another factor to watch is adoption rate. If this significantly grows over the holiday season, it is possible we will see price jumps as high as $700 per coin in anticipation of this adoption.
Update July 2014:
By now the Bitcoin community has managed to address almost all of the issues mentioned in the article below. Many transactions no longer require 6 confirmations, bitcoin prices are stabilizing, they are a lot easier to buy and regulation may actually increase the price due to the influx of professional traders and institutions. So my personal stance has pretty much changed since I wrote this article, however, always keep in mind pessimism is your friend. Blind delusion and greed can result in high losses.
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1 Bitcoins Are Slow
Have you ever used Bitcoins to pay for something? It’s slow. Even Litecoin which is considerably faster takes 6 confirmations and takes minutes! We’re living in 2013 – people are lazy and want INSTANT payments (that Visa and Paypal already deliver)
2 Bitcoin Prices Will Slow Adoption
People are mostly interested in Bitcoins because they heard of the many over-night-millionaires. Get-rich-quick schemes always fascinate people, it’s how we work, we all want to be rich and famous. At the same time, this will considerably slow adoption, people will not use it to buy stuff, they will use it as an investment vehicle. They may consider using faster coins like Litecoin until better alternatives emerge
3 Bitcoin Addresses Are Too Long And QR-Scanners Still Lousy
Can you remember a single Bitcoin address? No you can’t. Ok, but they can be stored in a QR-Code! Handy? No, most QR-Code scanners are still lousy and I don’t want to open this stupid scanner app every time I see an address. It’s incredibly annoying!
4 Bitcoins Are Not Easy To Buy
Ever tried to buy Bitcoins with Paypal? It’s not easy. Yes, there are a couple work-around, which I will not share here, because they come close to money-laundering. Sure, you have all sorts of services you can use to buy Bitcoins – but most of them are located on offshore islands, Russia or China. Generally speaking, Western countries do not put a lot of trust into these institutions.
5 Bitcoins Are Not As Anonymous As Many Claim
Some people almost managed to identify the original founder of BTC – how anonymous do you really think they are? Blockchains make it easy to track transactions
6 Once Your Wallet Is Gone, Your Money Is Gone
The decentralization is one of the biggest strengths and weaknesses. Once your wallet is gone, your money is gone. Poof. Millions of real dollars have been lost because of this, not so cool if you ask me. This is an urgent issue that a new currency will address and there are already a bunch of emerging currencies that make it a lot easier to retrieve your wallet using a simple key. Neat!
7 The Banks Don’t Want To Lose Power
Although some states have already declared it legal tender, banks may not want to lose power over money. The battle for your money has not even begun yet
Faster, More Intuitive Crypto-Currencies Will Change The World, Here’s Why
Bitcoin was the first popular crypto-currency and they deserve a place in history, but they are not here to stay. Other crypto-currencies will address all of the problems above and over night another currency will replace Bitcoins without anyone noticing. Bitcoins are a speculative investment vehicle that has been adopted by many businesses, but the API support, the UI and handling is awful. Regular users – the non-geeks – want something better, faster and more intuitive with cool handles and trustworthy institutions behind it. Semi-decentralized systems will emerge. Safer solutions with an easy wallet recovery will emerge or are already available. The list goes on.
Tulip Mania vs. Bitcoin Speculation Bubble
Bitcoins have a lot of disadvantages, one of them will bring them down eventually and when the market realizes it, prices will fall. For now, we see a classic Tulip-Mania – long live the Tulips …umm BTC’s!
Can Bitcoin address the issues mentioned above? Hell yes, but the founders do not seem to be interested in intuitive solutions or they would have done it right away, plus heavily altering an existing system such as Bitcoin is practically impossible due to all the money that has been invested already. A new crypto-currency can get it right the first time.
This does not imply that Bitecoins is one of the most lucrative investments you can make right now, but get out before the bubble bursts .. that won’t be before 2015