Bitcoin - Good or Bad? - An ALT View of the Bitcoin Bubble

Disclaimer: The views in this post reflect those expressed by the author and are not necessarily shared by the Altcoin community as a whole. Correct at time of posting!

It is difficult to fathom what the future holds for Bitcoin. It is an exchange mechanism where people who buy a percentage of Bitcoins can then trade lower priced Altcoins. At it's current rate of inflation, the Bitcoin value will be more than the entire world's Gross Domestic Product (GDP) within 10 years. I think eventually it will stabilise and become integrated into the monetary systems of the world. Currently there is no way to short (sell) Bitcoins without owning them first, which is a good thing for traders. It means that even if the market crashes, no Bitcoin holder will be completely wiped out. But it also means volatility, as the only way to make money from Bitcoin directly is to buy it and sell it for a profit, hence the current rate of inflation. Trader bots love volatility and are making insane profits from the charts on a daily basis. The "Bitcoin Bubble" has to end sometime. And it needs to be regulated; no one is overseeing the process. The more I look into Bitcoin the less integrity I find. It is supposed to make the world more abundant financially, compared to the current fiat system but who can buy coins at £10,000 per coin? Only the rich is the answer to that question.

"Matt, from my humble uneducated understanding...The whole idea of Bitcoin is the absence of regulation, no middleman, no oversight. Just a transaction between you and me. No government regulations, no central bank manipulation. It has integrity, abundance, between you and me. The lack of integrity is with financial institutions and government regulatory agencies.. (my opinion). And you can buy Bitcoin for $100 if you wish, a fraction. Survival and [the] thrive of cryptocurrency could make central banks obsolete."

Well you haven't done your homework. The middlemen are the miners and the hackers. The people who clear the blockchain transactions can be anyone from a large clearing house in China to Joe Bloggs on his computer at home. Small Transactions are already getting lost in the blockchain because minors are predilecting to process transactions with larger amounts and ignoring smaller transactions because they have lower fees. They shouldn't be able to do that technically. All transactions are hashed and added to the block in the order they are received and then whole blocks are processed at once to make it fair. So that means someone apart from the exchange and the bitcoin owner is influencing (manipulating) the "cannot be interfered with" transaction to make more money, while others with less money lose money. The rich get richer and as for the rest.... starting to sound familiar?

Also wallets with reasonable amounts of Bitcoin are hacked daily. It is not safe, developed, regulated, trusted or secure. And the blockchain tech is vulnerable. Once you buy bitcoin all you can do is exchange it for another alt coin, gamble it on an exchange or hold it insecurely, You got $100 to lose? Good luck investing!

It's all good in principle (see http://cryptoxbureau.com/invest-cryptocurrency/). While the price only goes up anyway... and as soon as you withdraw your Bitcoins and exchange them back for real dollars, your income will be subject to Income tax and (if it is a large amount) Capital Gains tax.

As soon as the price starts coming down (and it will) traders will want to short (sell) Bitcoin. Unlike the Foreign Exchange (FX), there is no way to do that at present if you do not own the Bitcoin in the first place. So there is no bear market, no pressure from big sellers to get the price down. Hence the over inflation, which in my opinion is designed to make a few people a lot of money while at the same time it becomes unreachable to most. It is absolutely illogical that a "notional value" for anything can be greater than the value of the world when it is backed by nothing but sentiment. Bitcoin is already greater in monetary value than the entire U.K. And it has not even been officially recognised yet.

One other thing to think about if you are planning to invest in Bitcoin: You cannot own Bitcoin unless you first own a fiat currency (to buy it with) and yet Bitcoin's goal is to replace currency! It has no value of its own. You cannot buy stuff with it. If you buy loads of Bitcoin you don't then own a warehouse full of gold or grain. All you can do is exchange it for dollar or HODL (Hold On for Dear Life) and hope your account doesn't get hacked or your wallet provider disappears overnight with your money.

How does that work...? When it depends on currency to exist in the first place? The original blockchain wallet concept has become obsolete already. To have a wallet installed on your computer means you have to download the entire blockchain ledger for the last six years and that is if you can even get it past your internet security software which will immediately block it as "malware". That means anyone with an older computer with a small hard drive cannot participate unless they trust someone with an online wallet. Wallet providers are already experiencing security problems and issues with transactions becoming "stuck" in the blockchain. Try it if you don't believe me. The system is almost impossible to work if you don't have money you are willing to lose. How is that creating abundance or helping the little guy?

If they wanted to create abundance (and not greed) everyone in the world would be entitled to a share of Bitcoin. Doesn't work like that at the moment. You have to buy Bitcoin with dollar and the price is sky high. Got no dollar to invest? Sorry, then you are not in the club! Same old, "Get rich quick, or get out." In my opinion.

Only time will tell if Bitcoin and other Altcoins will stabilise and become long term investments. But up until now, if your transaction becomes stuck or lost on the blockchain, there is no way to trace it, no-one to refund it and no-one willing to take responsibility for it... but the money has still left your account and someone, somewhere probably knows about it.

The current monetary system might be currupt, but are the criminals that use Bitcoin any less currupt? Some things to think about before you invest more than you can afford to lose in the notional currency that is Bitcoin.

Matt Blythe

Matt is the owner of Inner Vision Press, Inner Vision Personal Development and Inner Vision Photography. He is the Director of two companies and is the Author of the book "Enlightenment for Beginners". Matt also has experience trading currencies on the Foreign Exchange and investing in High Yield Investment Programs.