The Biggest Problem with Bitcoin as a Currency

Biggest Problem with Bitcoin

Disclosure: Nothing in this blog should be taken as investment advice. Do your own research. This blog is supported by advertising and affiliate links... Links to products and/or services on this blog may include links to affiliate programs that provide commissions to this blog. All of the content in this blog is 100% my own opinion.


The biggest problem with Bitcoin as a currency is not that it has no real value… The biggest problem with Bitcoin as a currency is its volatility.

Bitcoin does have legitimate value… Indeed, it has as much value as anything that people can believe in.

However, no buyer in their right mind would ever choose to use Bitcoin to make a purchase for anything…

Not unless they were 100% sure that the price of Bitcoin would fall immediately after the transaction was complete.

Conversely, no seller in their right mind would ever accept Bitcoin in exchange for their goods…

Not unless they were 100% sure that the price of Bitcoin would rise immediately after the transaction was complete.

Everyday transactions using fiat currencies, like U.S. dollars, works because everyone understands that the value of a dollar will not rise or fall by 50% in a day.

As Bitcoin has no chance of being a stable cryptocurrency anytime soon, its stability isn’t even considered as a factor here.

Bitcoin Has Value as an Idea

While it is possible to make purchases with Bitcoin, it’s probably better to hold it or trade it.

You would not buy a car using Facebook stock… But you would invest in Facebook.

Like Facebook was at its earliest stages, Bitcoin is attractive and investable as an idea. And judging by Peter Thiel’s investment in Bitcoin which was disclosed today, Bitcoin seems to have similar value as an idea.

Peter Thiel Bitcoin

It does not matter whether any cryptocurrency can be used for purchases of everyday items, as in the case of Bitcoin, or cannot be used to purchase any consumer goods, as in the case of Salt, or is purely a business to business tool, as in the case of XRP (aka “Ripple“).

Some cryptocurrencies have legitimate business uses.

Examples are XRP and Ether, which is used as a store of value to pay for “gas” powered “smart contracts”.

All cryptocurrencies are well suited for speculation, like stocks. 

Yes, there are cryptocurrency white papers, blue papers, gray papers, etc. that might propose that their coins or tokens are currencies… But those papers are merely hypothesizing potential uses for the coins and/or tokens that may one day become reality, maybe some day…

Maybe.

Sooo…

In the meantime, initial coin offerings are useful and have speculation value, like stocks, purely as potential wealth creation (or destruction) vehicles.