Does Bitcoin have the potential to replace fiat?

[Melo]

Bitcoin is gaining traction again after surpassing its previous all time high of $20k USD back in the bull run of 2017. It is currently valued at $28.8k at the time of this post.

The current bull run is different than the last one in how there are now billion dollar financial institutions such as MicroStrategy and Greyscale investing millions/billions of dollars in Bitcoin.

These investors are taking Bitcoin and holding it, making the available supply on exchanges less. As the demand for Bitcoin increases and the supply decreases, it results in sudden spikes in price. However, Bitcoin has not “crashed” after showing growth in such a short amount of time. It reaches a new ATH and consolidates along newly established support levels. This is further proof that Bitcoin’s median price increases with every cycle. Despite having major dips over the years, there was always an upward trend in its price.

https://coinmarketcap.com/currencies/bitcoin/

What’s so special about Bitcoin? Why are investors rushing to have a position in it?



This video briefly explains how BTC works, and how it differs from fiat currency and gold. The main advantage BTC has over fiat is that it cannot be manipulated by a centralized party (ie: the government) and that it does not depreciate over time, as opposed to fiat money that has an average inflation rate of 2%. People who leave their money in their bank account don’t realize that it loses purchasing power over time.

These institutions see the potential Bitcoin has here, and are allocating a significant amount of their money to BTC as a hedge against inflation, other assets etc.

The waves of retail investors have not appeared yet, but as Bitcoin approaches new all time highs, a domino effect happening becomes sooner than later.

Do you think Bitcoin has the potential to become a globally accepted and adopted currency? Do you think it doesn’t have a chance and is just a trend with no real substance? Let’s discuss.

[Arran]

Bitcoin is too slow to replace fiat. Unless there is a way to do the major optimizations to the system. Bitcoin can only handle something like 100 transactions a second while in the world there are tens / hundreds of thousands of transactions a second. There are other much more optimized crypto currencies. Perhaps in the future there will be something like Ripple or Ethereum for day to day transactions and bitcoin for your savings.

If crypto started getting used then it could be completely world changing for the reason that it takes away power from banks to create fiat money out of thin air in the form of debt that most of the world is enslaved to.

[domi]

My humble opinion:

While blockchain technology shows great promise, Bitcoin itself is the 21st century equivalent of the Tulip Mania. In other words, Bitcoin is in a bubble.

If we ignore crypto speculators, Bitcoin is a niche market mostly populated by gamblers, criminals and darkweb psychos. They aim to buy and sell in Bitcoin, hoping to remain anonymous in transactions. But Bitcoin fails at this too: it fails to protect them as many arrests have shown in the past. So the cryptocurrency doesn't even provide a good service for its main market.  Monero could be a better alternative for them, but it remains to be seen.

Bitcoin's only saving grace is that it has been used in countries with failing currencies like Venezuela.

Besides, it is needlessly complicated. If you're a regular guy who wants to buy something online without revealing identity, it's easier to get a prepaid gift card at your local bank or grocery store. It's way easier than learning about cryptocurrency exchanges, crypto wallets, and it's more comfortable than contacting cypto dealers online who probably do business with criminals.

Bitcoin cannot function as a currency. Its price fluctuates widely and it's not stable enough. Imagine the poor sap who bought Bitcoin at $20.000 during its previous peak, only  to see it crash below $4000 in value before he had to reuse the funds. Inflation rate of 2% is nothing compared to that.

Crypto speculators can earn money, yes, but it's nothing more than gambling.

Also, governments will never give up their ability to manipulate interest rates through quantitative easing ("printing money out of thin air"). Such loose monetary policy allows them to postpone the crash and to postpone necessary changes on the market. It's an amazing political tool. The cronies who are close to the newly printed money can spend it at original value while the rest of us have to pay the inflation tax.

[Melo]

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Bitcoin is too slow to replace fiat. Unless there is a way to do the major optimizations to the system. Bitcoin can only handle something like 100 transactions a second while in the world there are tens / hundreds of thousands of transactions a second. There are other much more optimized crypto currencies. Perhaps in the future there will be something like Ripple or Ethereum for day to day transactions and bitcoin for your savings.

If crypto started getting used then it could be completely world changing for the reason that it takes away power from banks to create fiat money out of thin air in the form of debt that most of the world is enslaved to.

It’s true, Bitcoin has older technology (lightning network has helped a ton with speed though) and is outperformed by some other cryptocurrencies like Nano, but despite this it’s remained the number one cryptocurrency as far as market valuation goes. I think this is mainly due to Bitcoin being the oldest, and therefore most trustworthy cryptocurrency.

It’s also true that Bitcoin serves better as a store of value and is often referred to as digital gold. There are other cryptocurrencies that are better suited for fast transactions but they have not had the same mainstream attention that Bitcoin (and to a lesser degree, Ethereum) has. Ripple (XRP) is actually being sued by the SEC: https://www.sec.gov/news/press-release/2020-338. I’m not sure what the long term affect this will have on XRP but it’s dropped nearly 50% in the past weeks.

Overall I agree with you in how Bitcoin is better suited as a store of value rather than a day to day currency. However the technology is being improved overtime and it could get another upgrade similar to lightning network.

Show content

My humble opinion:

While blockchain technology shows great promise, Bitcoin itself is the 21st century equivalent of the Tulip Mania. In other words, Bitcoin is in a bubble.

If we ignore crypto speculators, Bitcoin is a niche market mostly populated by gamblers, criminals and darkweb psychos. They aim to buy and sell in Bitcoin, hoping to remain anonymous in transactions. But Bitcoin fails at this too: it fails to protect them as many arrests have shown in the past. So the cryptocurrency doesn't even provide a good service for its main market.  Monero could be a better alternative for them, but it remains to be seen.

Bitcoin's only saving grace is that it has been used in countries with failing currencies like Venezuela.

Besides, it is needlessly complicated. If you're a regular guy who wants to buy something online without revealing identity, it's easier to get a prepaid gift card at your local bank or grocery store. It's way easier than learning about cryptocurrency exchanges, crypto wallets, and it's more comfortable than contacting cypto dealers online who probably do business with criminals.

Bitcoin cannot function as a currency. Its price fluctuates widely and it's not stable enough. Imagine the poor sap who bought Bitcoin at $20.000 during its previous peak, only  to see it crash below $4000 in value before he had to reuse the funds. Inflation rate of 2% is nothing compared to that.

Crypto speculators can earn money, yes, but it's nothing more than gambling.

Also, governments will never give up their ability to manipulate interest rates through quantitative easing ("printing money out of thin air"). Such loose monetary policy allows them to postpone the crash and to postpone necessary changes on the market. It's an amazing political tool. The cronies who are close to the newly printed money can spend it at original value while the rest of us have to pay the inflation tax.

While it’s fair to see Bitcoin as just a bubble, what is actually happening is that it (and the rest of the market) goes through cycles, every 4 years. If you bought Bitcoin at the worst possible time in the last bull run in 2017, you would be up 68% profit today. Most bubbles pop and either don’t recover or take many years to build up again. Bitcoin has shown much different behavior.

Also it’s a bit of a stretch to say that only gamblers, criminals and such are the ones who really occupy the market. If this were the truth it would wouldn’t make sense for the likes of PayPal, Cash App, Robinhood etc to allow you to buy Bitcoin from their apps. Also, it would sound like something that billion dollar institutions would steer clear of, but that isn’t the case: https://www.bloomberg.com/news/articles/2020-12-09/jpmorgan-says-gold-will-suffer-for-years-because-of-bitcoin

Bitcoin is just a currency, like cash. It’s not the root of the problems it’s been associated with such as dark web transactions. It was not made for that purpose.

I agree with you to an extent that it’s hard to adopt as a daily currency. I think that as time passes  and we move towards a more digital world, things like Bitcoin will be encouraged and made much easier to adopt.

[domi]

Also it’s a bit of a stretch to say that only gamblers, criminals and such are the ones who really occupy the market. If this were the truth it would wouldn’t make sense for the likes of PayPal, Cash App, Robinhood etc to allow you to buy Bitcoin from their apps. Also, it would sound like something that billion dollar institutions would steer clear of, but that isn’t the case: https://www.bloomberg.com/news/articles/2020-12-09/jpmorgan-says-gold-will-suffer-for-years-because-of-bitcoin

Here's what I said:

If we ignore crypto speculators, Bitcoin is a niche market mostly populated by gamblers, criminals and darkweb psychos.

Is anyone else really adopting Bitcoin other than the bad guys and Bitcoin speculators? Paypal may be offering Bitcoin transactions, but everyone still sticks to traditional ways of buying and selling. Some may use Paypal to buy Bitcoin for "investment," but how many will actually use Bitcoin as a regular currency in their day-to-day lives? I'm afraid the number is incredibly small, and I already mentioned some of the reasons for that (price instability, unnecessary complexity, low value provided by Bitcoin, etc)

I believe the institutional investors are pouring money into Bitcoin so they can pump and dump to make a quick buck off the current boom. If you think about it, there's lots of uncertainty surrounding the stock markets and real estate prices are reaching unsustainable levels around the world.

So here's what they may be thinking: "Bitcoin is already in a bubble, and since everything has become so uncertain, let's pour some money in there, prolong the boom and then sell to poor saps for profit as the price begins to come down again."

[Nyle]

As the world, we are developing day by day.
As we develop, technology improves and it becomes more useful and more important.
One of these developments is E-Commerce. People make a lot of investments and purchases on the internet, and new developments are occurring day by day. One of these developments is Bitcoin.
Although Bitcoin is very valuable these days, it is taking the market by storm. Considering the developments so far, such a thing is possible.

[Harshil]

As you said in the original post that bitcoin cant be manipulated by government, I think its not true cause any government can put a ban on trading of crypto currency and it can be manipulated and also if some rich company or person tries collecting BTC the price can be manipulated and the total number of BTC in market are constant and is fixed.

[Arran]

As you said in the original post that bitcoin cant be manipulated by government, I think its not true cause any government can put a ban on trading of crypto currency and it can be manipulated and also if some rich company or person tries collecting BTC the price can be manipulated and the total number of BTC in market are constant and is fixed.

Unless the government ban the Internet, they can't really ban crypto. Though they could try stop shops accepting it. Governments definitely will try to restrict it so they can maintain their control.