Bitcoin was created by Satoshi Nakamoto in late 2008 and has since then grown exponentially. Making many early investors multimillionaires. Back in 2013, it suffered a significant crash where its price collapsed by nearly 80%. It is thought that this crash of Bitcoin was caused by restrictions imposed by the Chinese Government and by a strong sell signal coming from technical indicators.
Flash forward 4 years and we are very likely to see Bitcoin collapse again. Here are 4 reasons why:
Bitcoin has an extremely toxic community
As described by many Redditors, Bitcoin has an extremely toxic community. This is horrible news for the currency because true value is built up through the community.
Practically every single post on /r/Bitcoin that somehow questions certain aspects of its core technology gets instantly banned by the moderators. Progress can only be achieved trough constant improvement. And like it or not, improvement is ALWAYS about making bad stuff better. The problem is that if developers never learn about the flaws in the system because suggestions are effectively censored, there won’t be any improvement.
After you are done reading this post I encourage you to check out and compare the Bitcoin community on Reddit with the Ethereum community. Feel free to share your findings in the comment section below.
It is not scalable enough
Bitcoin has a huge scaling problem and is unable to process the growing number of daily transactions. Actually, it is able to process them. But the average confirmation time of a bitcoin transaction is 1 hour. This makes it unsuitable for being used as a currency in our day to day lives.
- One double cheese burger with large fries and coke zero please.
- 0.00423 Bitcoin please.
- Thanks! Please wait over there. You’ll get your food once the transaction is confirmed. Network is not too busy today, won’t take more than 40 minutes.
Additionally, the speed at which transactions are processed depends entirely on the fee an individual is willing to pay to miners in order to complete the transaction as quick as possible. This has created a whole MARKET of transaction fees where users compete with each other by bidding with increasing transaction fees to get their transaction fulfilled quicker.
Back in 2012, transaction commissions at Bitcoin only cost a fraction of a cent. At the time I am writing this post, due to the big demand that this crypto asset is currently receiving, the average transaction fee is 4.38 USD. Crazy.
Bitcoin may be hard-forked
A fork is what happens when a cryptocurrency is “split” into two (or more) different currencies. Both currencies will have a different blockchain history from day 1. As a consequence, investors will have to support one of both currencies. In the worst case scenario, this eventually results in the slow death of the currency that is being supported less.
The conflict which may cause a hard-fork of Bitcoin is the fact that a portion of the bitcoin community wants a block size limit of 2MB to be established, while the other wants it to remain at 1 MB.
This dispute is boiling down to a confrontation on the 1st of August. The result will be determined by which side the majority of the miners support.
In the case that neither of both sides is the clear winner, two versions of the Bitcoin blockchain will emerge.
So if you decide that you want to keep your bitcoins even in this moment of huge uncertainty, please make sure to not spend or receive Bitcoins after August 1st until the whole dispute is settled. Otherwise
Otherwise, your coins might disappear in the transaction.
Bitcoin’s market share has dropped significantly from February 2017 when it had a market share of 85%, until right now when it is only 45%. Many analysts estimate that Bitcoin’s market cap will be surpassed by Ethereum before 2018.
New cryptocurrencies are popping up like crazy every single day. Although most of them provide no real value (shit coins), a handful might prove to be revolutionary. Some examples of recent successes are Ether, Monero, NEM and Dash.
For the past years, Bitcoin was the king of all cryptocurrencies due to 2 big factors:
- It is decentralized: Bitcoin was one of the first methods of payment that was truly de-centralized. This was a revolution to a world where money is extremely centralized (Banks, Governments etc). However, Bitcoin’s main competitor, the Ethereum with its Ether token has brought this feature to the next level with an additional feature, smart contracts.
- It is anonymous (kind of): Bitcoin used to be the most anonymous method of payment. While it wasn’t 100% anonymous, it did have an additional layer of privacy that normal fiat money does not have. But this is a thing of the past, a couple months ago a different cryptocurrency called Monero started to gain a lot of popularity due to the brilliant job it does at hiding the identity of the individuals that use it.
And those are the 4 reasons why in my opinion Bitcoin is going to see a significant crash in the next year or two.
Please share your thoughts in the comment section below.
And as always,