Before I get into my opinion on bitcoins, I will warn you that my opinion is not well liked. I have been told over and over again how great bitcoins are.
First Bitcoin is a “digital asset designed by its inventor, Satoshi Nakamoto, to work as a currency.” (Wikipedia)
My biggest concern is that there are only 21 million bitcoins created. I am assuming the purpose of the cap is to create a want/need which creates a frenzy among those who want to use bitcoin (unregulated by any government at present) for online transactions. Similar to Nintendos recent release of the mini old school Nintendo system, only so many were made causing people to scramble to get their hands on one when released. When limits are placed on goods or in this case bitcoins, the frenzy artificially inflates the value of said item.
Currently, as of Feb 2016 there were already 15.2 million bitcoins out of the 21 million in circulation. The going price for one bitcoin as of this posting is over $1700. My question becomes once all 21 million bitcoins are in circulation, then what? The creator and those elite few will have made their piece of the pie…..where does that leave the minions?
Concerns over illegal activities using bitcoins have already come to fruition. In 2013 the FBI closed down a website called Silk Road for remaining anonymous to supposedly buy/sell drugs, guns and supplying tutorials to hack things like ATMS.
Another concern is safety. There is currently nothing in place that I am aware of that prevents losses due to forgotten passwords, website glitches and the like. Do not forget the possiblity that scammers are good at infecting computers with malware/viruses so they can hack into your accounts that hold your actual funds not only bitcoins.
Bitcoin as you can see just from the dramatic increase in value is quite a volatile investment. “According to an analysis published in The Wall Street Journal by Campbell Harvey, a finance professor at Duke University, bitcoins have been 7.5 times as volatile as gold, and more than eight times as volatile as the S&P 500 over the last three years. This coincides with the analysis of Marie Brière, associate professor of Universiteé Paris Dauphine in France, who calculated an annualized return of 370% for bitcoins with 175% volatility. Such violent price movements within short time periods are not consistent with an ideal exchange medium for buyers or sellers, limiting bitcoins as a significant vehicle for businesses.” (money crashers)
“According to an article in the UK edition of Wired, 18 of 40 web-based businesses offering to exchange bitcoins into other fiat currencies have gone out of business, with only six exchanges reimbursing their customers. The authors of the study estimate that the median lifespan of any bitcoin exchange is 381 days, with a 29.9% chance that a new exchange will close within a year of opening.”
Think about the above paragraph a minute. How many of you out there are spending your valuable time on websites giving away minute amount of bitcoin? With the above statistics it seems that the chances are very high that the time you are spending will be in vain.
Now, I hear the groans and the buts…..”but big companies are accepting bitcoin”…….hold up, not exactly. They use a middle man to process those transactions. Businesses such as Dell, Expedia, Microsoft, and Time, Inc., to name a few use middle men who turn the bitcoins into US Dollars and those with the bitcoins pay a transaction fee. Guess what? Congratulations you have just paid more for your product thanks to using bitcoin! Of course, if you have managed to get bitcoin for free, then Congratulations!
The assumption is that 80% of the 21 million bitcoin will be mined by 2018. What happens once they are all mined? That question remains unanswered at this time. Lots of conjecture abounds about the viability and longevity of bitcoins. Many like to compare bitcoins to gold, however while gold may not be infinite there is still quite a lot of gold not recovered and as time passes more ways to retrieve the gold will become available. Bitcoin is finite there is a limit of 21 million.
In all honesty I find the bitcoin boom rather fascinating as it shows how human nature works. Everyone strives to strike it rich or rather the majority seeks to find ways to make an easy buck. Bitcoin has definitely caused a fervor of seekers who in my opinion are wasting their valuable time and possibly hard earned dollars attempting to gain minute pieces of bitcoin in hopes of gaining at least 1 bitcoin that can be traded for actual dollars.
For me, the questions and concerns, as well as most definitely the cost of 1 bitcoin, have me to chicken to waste my time and/or money on bitcoins. If you want to dabble in bitcoins, go for it and best of luck. The writing I see on the wall is one of two things: either governments are going to take over the utilization of bitcoins or once they have run their course and those with the deepest pockets cash them in, bitcoins will become once again a valueless bunch of numbers on computers and they will run to the bank laughing at all of us fools who bought into the notion that we can have an unregulated source of invisible currency.
Who knows, I could be wrong. My point is that people should understand the hype and hoopla before buying into it. I have no idea how many other coin based sites have cropped up over the past few years (and they have under different names), attempting to be another bitcoin, but that in and of itself tells me I have better odds with my monopoly money.
One last item as food for thought. Presently, there are multiple sites online offering people who join them to collect pieces of bitcoin for free to their bitcoin wallet and given the cost of 1 bitcoin (despite that it is a minute amount), how do they afford to do so? Where is the money coming from and how does it benefit them?
Do your due diligence before opting into anything online or off. Currently I think bitcoins are like playing the lottery. Some win and most don’t.