Digital currency bitcoin continues to grow in popularity and worth. Pro athletes are demanding to be paid in bitcoin and payment platform PayPal has added bitcoin to its payment options. But a true currency? Some say no.
The U.S. The Treasury is looking into requiring banks to keep records of cryptocurrency transactions. Various central banks including the U.S. The Federal Reserve and the European Central Bank are examining how to digitize sovereign currencies, Bloomberg reported. These move are considered validations of the blockchain code underpinning bitcoin.
Still, some experts say that despite bitcoin’s growing popularity, it will never be a true currency.
Here are three reasons why.
Whales can dictate the value of bitcoin, either by hanging on to their reserves or by dropping their bitcoin shares. And, right now whales control large quantities of bitcoin. A bitcoin whale is a person or entity that holds large amounts of bitcoin. Whales have so much bitcoin that they have the ability to manipulate the currency valuations, according to Investopedia.
“A whale’s exit — a more likely event now that bitcoin is the domain of not just believers but also pragmatic financiers — can send ripples throughout the ecosystem,” Bloomberg reported.
This makes bitcoins very unstable.
While the total market value of all cryptocurrencies topped $1 trillion for the first time on Jan. 7, investing in crypto “remains a risky and volatile prospect, as the instruments remain largely unregulated assets subject to the whims of a fickle market,” Bloomberg reported.
Despite its growing legitimacy, bitcoin and other cryptocurrencies are still tied to scams, money laundering, tax evasion, cyber thefts, and more, Bloomberg reported.
The nature of bitcoin makes it easy to use for unsavory transactions.
“Almost from the beginning, only a small percentage of bitcoin transactions have been for actual goods and services — and of those, many have been for illicit goods and services, like drugs and online gambling,” Medium reported.
Visa processes approximately 6,000 transactions a second and can do more than that. Bitcoin, by comparison, can complete just seven transactions in the same amount of time.
This slow place would make it difficult to pay for something at a local convenience store or even online.
“Some of the failure of bitcoin to live up to its promise as a currency has to do with practical problems with the way it works, most obviously the fact that bitcoin’s design makes it very slow at processing transactions,” Medium reported.
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