Should a Christian join the crypto defense

The future of bitcoin is not cryptic

Bitcoin has lost almost half of its value within a few days. This is fueling rumors about the end of this supposed “pyramid scheme”. But we should concentrate on what Bitcoin can deliver - it will no longer become a currency in the future either.

A lot of hype, a lot of enemy - the "original crypto currency" has been facing a stiff breeze for a few days. After a breathtaking rally in the past few months, Bitcoin lost almost half of its market value for a short time. The arguments against Bitcoin are not new, but were forgotten in the euphoria of investors. Bitcoin has a high level of energy consumption, fails as a means of payment, could be banned, can be manipulated and is in danger of being displaced by digital central bank currencies. However, these entirely justified allegations do not endanger the concept of cryptocurrencies. The advantages of a decentralized, efficient and forgery-proof technology on the blockchain are too impressive. When you talk about cryptocurrencies, you have to be aware that they are not really about currencies.

What is commonly referred to as crypto currencies are primarily Bitcoin - which is most likely an investment product or store of value - and coins with additional functions such as “smart contracts”, which could be described as settlement networks. These link payments with conditions. These smart contracts enable traditional financial services such as lending and asset management to be decentralized without financial service providers intervening. These "smart" cryptocurrencies, which have the potential to revolutionize the financial industry, have led to market shifts in the crypto universe: In 2015, when the general public first came into contact with the topic of digital currencies, Bitcoin made up 98% of the market capitalization of the crypto universe. Currently, the “original crypto currency” still has around 40% of its value.

In the past few years, cryptocurrencies have sprung up like mushrooms. Mostly they were imitations or mixed forms of the concepts described above. The website currently counts over 9900 currencies. Many will, however, disappear again as quickly as they appeared. The dot-com bubble could be used as a comparison. At the turn of the millennium, many investors foresaw that the Internet would be a disruptive technology that would permanently change our lives. But only a few companies that adorned themselves with "dot-com" survived.

Will Bitcoin be among the survivors of the crypto bubble and will it continue to be relevant in the future? “Crypto-disciples” are convinced that Bitcoin will remain relevant simply because of its history and the size of the network. But that alone shouldn't be enough. In order to be able to assess the future, it is important to analyze what Bitcoin can do and what disadvantages it has. Tesla CEO Elon Musk also roused institutional investors when he recently announced that he would no longer accept Bitcoin as a means of payment because of its high energy consumption. Sustainable investing is the order of the day for many, especially professional investors. It has long been known that checking Bitcoin transactions (which also leads to the issuance of new coins) in a competition between computers (proof of work) consumes a lot of energy.

The following can be said of the individual criticisms:

First - the immense energy consumption: This is a function of the high Bitcoin exchange rate. If the value remained the same, the electricity requirement of Bitcoin would be halved in four years due to the mining system. However, you cannot create anything valuable without using energy. Bitcoin miners often claim that they use green electricity or electricity that would otherwise not be used. That's partly wishful thinking. The Bitcoin network consumes the energy of a medium-sized industrial country; if this could be saved, less electricity would have to be produced worldwide from clean and “dirty” sources.

Second - Bitcoin is not a means of payment: For reasons of capacity, the Bitcoin network is unable to operate a global payment system. Instead, years ago the view prevailed that the crypto currency was suitable for maintaining value and was, so to speak, the "new gold". The energy-intensive “proof of work” makes Bitcoin more secure than newer currencies that rely on the less energy-intensive “proof of stake”. A random mechanism decides who can form a new block on the blockchain.

Third - the market is being manipulated: Bitcoin has often seen percentage losses in value like in the past few days - high price increases are also bought at the price of volatility. But recently, investors across the crypto sector lost $ 1,000 billion, which is leaving deep scars. The industry won't win these investors back anytime soon. But one must not forget that this is a financial product that is still in its infancy and has not been known to the general public for a decade. It would also be wrong to hope that performance in the coming years will be comparable to that of a solid investment such as Nestlé stock. But what makes a good investment product that is resistant to manipulation? That it is widely accepted and liquid. Bitcoin still has a market capitalization of nearly $ 800 billion, making it twice as "valuable" as the world's largest retailer, Walmart. The trading volume in Bitcoin is around five times the daily traded volume at Apple, which is the largest company in terms of market value. In South Korea and Hong Kong, the trading volume in cryptocurrencies was higher than that on the stock exchange on certain days this year. Compare Apple Stocks to Bitcoins? Yes. Because the size shows that the crypto currency is also relevant in trade, even if it has not established itself as a means of payment.

Fourth - States will ban cryptocurrencies: However, it remains to be seen whether the “digital gold” is a good protection against inflation. The long absence of inflation in the industrialized countries and the high speculation-triggered fluctuations in the Bitcoin price make an analysis difficult. Inflation-plagued countries such as Venezuela, Nigeria and Turkey are intervening to show that they have confidence in the cryptocurrency. For example, the Turkish government unceremoniously closed the largest trading centers in the country on charges of criminal activity when the devaluation of its own national currency accentuated. The idea often haunts the markets that governments would soon ban private crypto currencies - China has already taken the first steps here, and the authorities in the USA and other countries are regularly addressing this. It is argued by crypto advocates that this is not possible because you would have to "turn off the Internet". This applies to private individuals. Institutional investors can be controlled by the authorities. In numerous countries, however, this would be painful because the crypto industry has now become a relevant economic factor, with a dovetailing far into traditional finance. In the case of private individuals, the state would probably apply bans where crypto currencies encounter the real world, for example at trading venues.

Fifth - Bitcoin is being displaced by the central banks: Numerous central banks are working on tokenize their national currency - especially China. However, these will be central and monitored systems. On a private blockchain such as Bitcoin, the assets are safely stored in the form of a coin and can be traced at any time - without it being necessarily able to be assigned to a person. This anonymity is a citizen's right to freedom - especially in a future world in which the state always has an eye on every single digital franc. A certain amount of crime has to be accepted, which is no different today with traditional currencies.

Conclusion: Bitcoin will still set the pace of the crypto industry for the foreseeable future. As with other speculative investments, you should only invest money in Bitcoin that you can get over losing without getting into existential hardship. If you want to know where the Bitcoin will be in a year or ten years, you have to pull out a crystal ball. There are no fundamentals that can be used to make a valuation. And in the past few days it has been shown that forecasts on supply and demand are pure speculation - and with a tweet or the threat of new regulations are obsolete. However, the prognosis that cryptocurrencies will remain with us, as a digital form of central bank money, as a means of payment that are subject to conditions, or a store of value like Bitcoin, is not daring.