Today, Bitcoin represents a $687 billion market with a lot of infrastructure, context and visibility in global finance. Its use, along with the use of other cryptocurrencies and decentralized finance assets, represents a major sea change in the world economy.
Many analysts believe that we're on the cusp of even bigger Bitcoin sectors, as major institutions and companies begin to see Bitcoin as a key type of value store. (Read also: Are Cryptocurrencies the True Future of the World's Economy?)
Still, people are asking each other whether Bitcoin has what it takes to endure through the ages. They're still wondering if this digital coin and its colossal market is just a flash in the pan.
Will Bitcoin be around for a long, long time? Here are five arguments in each direction.
Bitcoin's Staying Power
These are some of the top reasons that investors and experts are bullish on BTC.
One of the central aspects of Bitcoin's popularity is that it has a certain amount of financial solidity. One of the best ways to explain this is that Bitcoin is resistant to the machinations of national central banks.
This, on its own, is a lot of what has caused investors of all sorts to see Bitcoin as a “safe haven” in a battered equities market. As people experience new doubt in the traditional banking system and stock market, Bitcoin gains its own luster.
Bitcoin is also more portable than gold and precious metals. It carries its own immutable ledger chain everywhere it goes. In addition, take a look at all of the Bitcoin ATMs springing up on street corners, and the inclusion of easy investment Bitcoin tools on platforms like PayPal. Bitcoin is becoming one of the easiest assets to buy and hold for the future.
A Big Market
There's the massive infrastructure that's attached to the Bitcoin market, and then there's its value. Bitcoin started off as a cheap digital coin, but now the value of a single coin is more than many people have in equity in their homes.
Bitcoin has become widely and almost universally accepted as an investment medium. In the beginning, it was supposed to be a digital way to pay for things. Instead, it has become a digital commodity of sorts, and one that is widely popular on investment markets.
Bitcoin also provides a degree of data anonymity for holders and users. This is kind of a double-edged sword, as we’ll see on the other side of the Bitcoin argument, but the anonymity does have some appeal to a certain class of investor who may have previously kept money under a mattress. At least this way, with any luck, their assets will beat inflation. (Read also: Hacking Cryptocurrency.)
In addition, the consensus-based nature of Bitcoin investment and tracking means that it has that accommodation for frictionless verification or automatic trust. This in turn allows for cheaper and more efficient transactions that don't have to go through all of the elaborate verifications in the traditional banking system. So while people used to send international payments through protocols like SWIFT, Bitcoin and other cryptocurrencies provide an easy way to change this model for good.
Reasons Why Bitcoin May Fail
Notwithstanding all of the above, there are a number of Bitcoin bears out there. Here’s what some of the skeptics are saying.
Remember learning about the tulip bulb mania? The 17th-century craze for tulips drove the price beyond the means of all but wealthiest of the wealthy, an unsustainable point that was destined to collapse upon itself. Many analysts have invoked past bubbles as a way to talk about whether Bitcoin will, at some point, collapse in value. It's true that if that happens, other coins will probably take Bitcoin's place. However, the likelihood of Bitcoin collapsing in value is a subject of fierce debate and not likely to be ruled on here.
Concerned central banks and legislators do have tools for controlling the success of any cryptocurrency. If enough world governments got together and banned Bitcoin, the market will probably die out. In fact, some countries have tried to act to ban Bitcoin. That brings us to another facet of this debate: although Bitcoin is the dominant market cryptocurrency right now, (experts are typically throwing out market dominance numbers from 60% to 70%) there are other contenders.
Some companies are moving into Ethereum, including such big names as Ameritrade and ING. Elsewhere, top brass are looking at Litecoin, Polkadot, and other blockchain platforms, diversifying for the future, in which any of these coins, or Bitcoin itself, could be easily supplanted by others. (Read also: The Differences Between the Top Three Cryptocurrencies.)
Lack of Scalability
Yes, Bitcoin is essentially finite, despite the fact that it's made up of digital data. The nuts and bolts of this have to do with the very particular mining operations that add to the Bitcoin blockchain, with the difficulty of "mining" growing as it gets closer to the 21 million coin cap that has been set by its creators. Still, not many people consider scalability to be the biggest limiting factor in Bitcoin's success. Some of these other arguments carry a lot more weight.
One very common concern around Bitcoin is the anonymity and freewheeling nature of this asset that we mentioned above. There's the risk of cyberattacks connected to Bitcoin-related crimes, and many believe that Bitcoin widely facilitates fraud and money laundering. One concrete example of Bitcoin connected to crime and fraud is the rampant use of Bitcoin as a payment medium in ransomware attacks – where anonymous hackers steal someone's data and order them to pay a ransom to have it returned. Without Bitcoin, they would have to request payment through some system that could be tracked by investigators. With Bitcoin, they don't have to.
An Untested Commodity
Simply speaking, Bitcoin is new. We don't have hundreds of years to analyze its past track record. We don't have the kinds of market cycle information that we do for equities or precious metals. But that's not stopping a lot of investors from deciding that Bitcoin is in some ways more solid than either gold or equities. Some of the above arguments are boosting confidence in new cryptocurrency assets, and encouraging investors from all walks of life to get on board.
Think about all of these pros and cons if you are interested in wading into the BTC market.