Prediction: Bitcoin is a zombie as a currency
“In case you haven’t heard, Bitcoin is the sexiest thing on the world currency scene. If The Da Vinci Code knocked up World of Warcraft, Bitcoin would be their baby – and Alex Jones its nanny. Supermodels will literally eat out of your hand once you flash some BTC at KFC. Except, you can’t…yet. Or likely, ever. Here are my thoughts on why Bitcoin is a zombie dressed up like Paul Revere – with one tiny hope of reanimation.”
What Happened: Not a currency
R.I.P., Bitcoin. It’s Time to Move On. – Washington Post
Bitcoin Is a Delusion That Could Conquer the World, The Atlantic
“bitcoin appears to have flopped as a mass-market currency”
Prediction 1: Government Can Shut It Down
- It’s marginally legal.
- It’s easy to shut down.
What Happened: Global Government Crackdowns
Finance minster Arun Jaitley, in his budget speech today (Feb. 01), stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India. He reiterated that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems.
The court ordered Coinbase to provide taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period.
Prediction 2: Instability does not a currency make.
3. It fluctuates wildly. That’s great for speculators but terrible for commerce…in a world built for dollars. If Macy’s accepted Bitcoin, your 1Bc jacket might deduct either $80 or $150 from your account. Jersey housewives are less volatile.
8. Benefits to merchants are marginal. Bitcoin evangelists argue that Bitcoin is cheaper to accept and process than credit cards. Not really. To compete, Bitcoin would need to have chargebacks, customer service, transaction processing, system development/maintenance, and rewards. Factor in all those costs plus a small profit and the economics start to look almost exactly like those of credit cards.
What Happened: Too volatile to use, even by early believers
Who really owns bitcoin now? (FT), Jun 2018
Chainalysis notes that the “vast majority” of transactions it analysed showed bitcoin being received from exchanges and rarely sent to merchant services to pay for goods or services.
“Speculation remains the primary use case for these digital assets; merchant or institutional adoption does not appear to be a primary driver of price,” says Preston Byrne, an English structured finance lawyer and cryptocurrency observer.
Economists define a currency as something that can be at once a medium of exchange, a store of value and a unit of account. Lack of adoption and loads of volatility mean that cryptocurrencies satisfy none of those criteria.
The number of retailers accepting cryptocurrency as a form of payment is declining, and its biggest corporate boosters like IBM, NASDAQ, Fidelity, Swift, and Walmart have gone long on press but short on actual rollout. Even the most prominent blockchain company, Ripple, doesn’t use blockchain in its product. You read that right: the company Ripple decided the best way to move money across international borders was to not use Ripples.
Over the past year or two, as block size limits have been reached, Bitcoin has evolved to become better-suited to being an asset than being a means of exchange.
This has led to Bitcoin becoming less useful for payments, however. Transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies. (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. For a regular Bitcoin transaction, a fee of tens of U.S. dollars is common, making Bitcoin transactions about as expensive as bank wires.
Because of this, we’ve seen the desire from our customers to accept Bitcoin decrease. And of the businesses that are accepting Bitcoin on Stripe, we’ve seen their revenues from Bitcoin decline substantially. Empirically, there are fewer and fewer use cases for which accepting or paying with Bitcoin makes sense.
Steam Ends Support for Bitcoin, Jan 2018
“It has become untenable to support Bitcoin as a payment option”
“In the past few months we’ve seen an increase in the volatility in the value of Bitcoin and a significant increase in the fees to process transactions on the Bitcoin network,” Valve said in a post on Steam.
Prediction 3: It’s like calculus.
7. It’s more complex than Linux. Don’t know what Linux is or how it works? Exactly. Bitcoins violate so many of the basic rules of payments innovation, I’ll shamelessly point you to my last article on that subject.
What Happened: Bitcoin’s complexity opened door to lots of competition
“Bitcoin hasn’t really made it mainstream. What we decided to do with Stellar is create this common language,” she said.
She added that the trouble with Bitcoin and other cryptocurrencies is that they’re challenging to understand and can even be hard to acquire, as they must be “mined” or bought from specialty exchanges, which creates a lot of friction. Stellar, she says, is creating a universal network.
Prediction 4: The Bitcoin “revolution” requires the establishment
“Without powerful influencers driving adoption, Bitcoin is destined to die alone, eaten by cats. OK, cat videos.”
What Happened: Major VC’s admit Bitcoin may not win and whatever does will need Government endorsement
Circle, a payment startup owned by Goldman Sachs, announced yesterday that it’s launching a new cryptocurrency called the Circle USD Coin. The new currency is basically a digital version of the dollar that you’ll be able to purchase by trading in, you know, real money.
Given Goldman Sachs’ recent investments in the crypto realm and announcement that the firm would trade Bitcoin on behalf of investors, it makes sense that the financial giant is trying to control the market as best it can.
US Digital Currency (Sam Altman, May 2018)
Although I don’t think the US government can stop cryptocurrency, I do think it could create the winner–let’s call it “USDC” for US Digital Currency–and fix some challenges that governments currently face with cryptocurrency.
I think the first superpower government to do something like this will have an enviable position in the future of the world, and some power over a worldwide currency.
The US government could decide to treat USDC as a second legal currency, which would be hugely powerful. (I think the US doing this would be significantly more impactful than the smaller governments thinking about it now.)
What Happened: big money establishment players pile in
In March, Noble Markets investor Matthew Roszak told Inside Bitcoins, “There is not one single whiteboard on Wall Street that does not have the word ‘bitcoin’ on it.”
Prescription: Asset-backed Bitcoin
“OPEC, Russia and other oil-producers have made numerous, but (so far) empty threats to stop accepting dollars for oil. If those countries were truly serious, Bitcoin or another currency backed by a basket of commodities could work.”
What Happened: loads of asset-backed cryptocurrencies launch
Stablecoins have raised over $350 million.
We now have 45 projects fighting for the exact same prize.
Imagine the 45th stablecoin founder convincing investors to spend money on a project going up against 44 exact replicas
Not sure if I feel worse for the founder or investor… pic.twitter.com/emrEzUJWTR
— Kevin Rooke (@kerooke) October 25, 2018
Prediction 5: the places Bitcoin can work…
Another opportunity is to go where you’re wanted…Countries with runaway inflation, weak currencies, or those dependent on dollars might want something more stable.
Can Bitcoin Conquer Argentina?, May 2015
Prediction 6: Bitcoin is a government aide
I might never stop laughing if someday we learn that “Satoshi Nakamoto” is really Barack Obama and the entire Bitcoin operation was a government plot to track down criminals! “Agents Winklevoss reporting for duty, Mr. President!”
Ledger audit trails are a dream come true for tech-savvy authoritarian states, like China (Apr 2018).
The Bitcoining of the US Dollar
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