Bitcoin’s recent surge has raised questions about the future of the digital currency. So, is Bitcoin the currency of the future? Or is it an inflated balloon?
Bitcoin’s rapid rise is on everyone’s lips. On the one hand, there are those who say that the digital currency may be the gold of the future, on the other hand, there are those who think that it is a completely inflated bubble.
While Bitcoin broke a new record by rising to the level of 58 thousand dollars last Sunday, it fell to 46 thousand dollars on Tuesday morning. Even Tesla’s CEO and Bitcoin fan, Elon Musk, said that “cryptocurrency may be overvalued.” This decline especially played into the hands of those who were skeptical of Bitcoin. However, after last Tuesday, Bitcoin continued to rise for a while. Last Wednesday, the coin rose again and traded above $50,000.
Bill Gates, the founder of Microsoft, comments on Bitcoin, “My opinion is, if you have less money than Elon you should probably be careful.” So what can history, comments about the future of Bitcoin tell us about this cryptocurrency? Finding out whether ‘ is the gold of the future or a big bubble ready to burst, this is what the experts asked.
Bitcoin can’t replace gold
Bernd-Stefan Grewe, a history professor at the University of Tübingen in Germany who studies gold, says Bitcoin and gold are incomparable. Grewe told DW that gold is universally accepted around the world and can be easily converted into local currency wherever you are.
According to Grewe, who reminded that Bitcoin is not like this, it is very important that digital money can be converted into local currency. “If things change and I want to convert Bitcoin quickly, who guarantees that I can exchange it for another currency and convert it to the price I want to sell?” Grewe said. he asks. He adds that it takes days to cash out Bitcoin.
These transaction points will undoubtedly play an important role in determining the future success of Bitcoin. Because most Bitcoin-related scams are due to the anonymity of digital currency exchanges. The Bitcoin exchange records and secures its transactions with the blockchain, but the anonymity of the accounts that send and receive Bitcoin may also be beneficial to criminals. According to the authorities, information can still be collected at these transaction points.
“The original idea behind Bitcoin was that you have an alternative currency where you can’t monitor transactions and is independent of central bank influence. That’s a bit of a naive idea,” Grewe says. “Naturally, taking control at certain points and controlling the money supply is the whole economic system for the better. And I believe this is at the point where Bitcoin was converted into traditional money.”
Anticipating that with Bitcoin’s more interest and acceptance, the interest of legal and regulatory authorities will increase, Grewe pointed out that criminals can exchange money via Bitcoin, and says, “Government institutions will definitely monitor it. At least I hope so.” So what awaits Bitcoin in the future? Grewe’s warning on this subject is as follows: “If faith in convertibility is lost, Bitcoin will collapse too. Just like any other currency. There could be massive inflation.”
Balloon rises in the past
So, is it appropriate to call Bitcoin’s rise a “bubble”? According to Will Quinn, a finance lecturer at Queen’s University Belfast in Northern Ireland, there is a short answer: No.
“There are many similarities with cryptocurrencies that have ‘exploded’ in the past. But basically Bitcoin is new and different,” Quinn told DW. However, Quinn also points out the similarities between Bitcoin’s 1720 Mississippi Bubble event. The Royal Bank of France, which was the first to develop the use of money, bought a company to help a French colony in Louisiana, then increased the popularity of the company with an effective marketing method, eventually the company’s stock grew enough to create a need for more paper notes. “If you look back, you’ll see that the prices are very high there too,” Quinn warns.
The future of fraud?
Another thing that Bitcoin reminds Quinn of is the Ponzi scheme, a fraudulent method in which investors are paid with money from subsequent investors.
Quinn says the Bitcoin system is designed to pay off early adopters generously, with funds raised by later investors. Comparing this to early adopters aggressively recruiting new adopters, Quinn says, “That’s what happens on the Internet. People are always trying to persuade you to buy Bitcoin.”
“This is almost an enhanced version of a Ponzi scheme,” Quinn points out, noting that there is no central operator from which you can withdraw the money. So what does all this tell us? Looking ahead rather than history, neither Quinn nor Grewe think that everyone will be trading with Bitcoin in the future.
“Personally, I’ve been waiting for this bubble to burst for three years,” Grewe says. For Quinn, Bitcoin’s transaction limit is, among other things, a major obstacle to its adoption. Saying that there is no way to implement these changes because Bitcoin has no one responsible, Grewe adds, “This is a governance structure that is designed not to be changed.”
“It looks like a balloon to me,” Quinn concludes.
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