The Myth of the Bitcoin Bubble: The Misrepresentation of Bitcoin is what Hurts its Value
Cryptocurrency, is a phrase that gets tossed around a lot in the news, but there seems to be a popular misunderstanding of what it is and what purpose it serves. By far, the most popular and well known cryptocurrency is Bitcoin, which first emerged in early 2009.
When Bitcoin first began to rise, people were excited by the opportunities it presented. The lure of Bitcoin was that it’s a decentralized currency, meaning it’s not issued by any central authority such as the government, and it’s free from outside influence. Apart from that, it’s also anonymous and it can’t be confiscated or limited by political control. Most importantly, the software to mine Bitcoin is open source, meaning it’s free, and it’s secure, due to the various security checks in place. Because of these and several other benefits, people saw Bitcoin as an asset to invest in, and so people started buying and selling Bitcoins like they wound stocks.
But these investors soon began to flee due to drops in the value, leading to mass transactions that further destabilized the value, making Bitcoin volatile. Since the massive drops in value, many economists and investors have started to claim that Bitcoin is a bubble ready to burst, such as JPMorgan Chase CEO, Jamie Dimon, who called it a “fraud”.
The people who are saying that it’s a bubble fail to understand what Bitcoin is. They see it as an asset, something to be bought and sold off. They see it as the new gold, or the new silver. But it’s called a cryptocurrency for a reason. It’s not meant to be treated like an asset. It’s meant to be a currency. As Joel Comm, an entrepreneur writing for Forbes, said Bitcoin was always meant to simply be “a tool meant for merchants accepting and sending low cost payments online”.
But for it to succeed in that regard, it needs lower volatility. For that to happen, people need to stop treating it like a stock. It’s a currency like the dollar. As Comm notes though, while investors are scared away by the fluctuating prices, the value of Bitcoin will stabilize to the point where its original purpose can be met.
The notion of a currency that is free of outside influence, irreversible, and anonymous challenges the traditional forms of currency controlled by banks and governments stands to only grow stronger as time goes on. While the market may currently be unstable and prone to wild fluctuations, as people start to understand what Bitcoin really is, it will start to stabilize and the value will level out. At that point, we can start seeing Bitcoin for what it really is: just another currency like the dollar, but one that’s safe from outside influence, anonymous, and easy to use.