Gold throughout history of mankind has managed to establish and secure its position as a safe haven and good store of value.
Never mind whether it is during war, economic recession or political unrest, gold will always command a certain range and level of demand to be used as a reliable medium of exchange. This lasting effect is testimonials of its resilient status of acceptance but have we ever ask ourselves what has made it become so valuable, so high in demand that through ages of time, this has somehow become a self-perpetuating phenomenon. Is it because of its intrinsic value, historical value, or because of the perception of what’s important by the past generation that makes us think differently? Or it is because of other reasons? Here we will try to look at the contributing factor and try to relate that to bitcoin and cryptocurrency in general.
Bitcoin since its emergence in 2009 has come a dominant candidate to be accepted as an alternative currency. Embracers have lauded it as the potential fiat replacement that could one day overtake and provide us with the level of anonymity, control and freedom to decide what we want to do with our money. The attraction especially coming from its low cost sending fee, almost instantaneous transaction mode has made it the choice of payment mode where you can practically send your funds to anybody located anywhere across another the globe as long as the person is connected to the network. Its borderless, no restriction, hassle-free, lightning-fast feature would have easily made it among the choice of currency for daily use, but however, until now the progress that it have made is far from impressive. Acceptance level is only confined to certain groups of people who are basically from the younger generation, predominantly male, made up of mostly programmers and coders with minority coming from business-minded entrepreneurs.
So why despite all the features, bitcoin acceptance level is low? Here we will try to look at the obstacles Bitcoin is facing.
Bitcoin price has been volatile no thanks to the speculators. Instead of being used as a mainstream currency for exchange of goods and services, it has ended up becoming a speculative object for traders to make money from the spreads and movements. From its high of 1000 dollars mark achieved in 2013, it has now dropped to within 200 – 300 level and that represents almost 80% decline, in just over a year. In between, the ups and downs volatile movements tend to benefit only the traders and overall these present even further trading opportunities.
In terms of business perspective and especially for small and medium-size business owners who operate on very thin profit margin, there will be an increased risk of loses caused by price fluctuations. Although one can argue that they can use the service of payment processors to counter the effects of volatility, in reality, most of these service providers take a large percentage or cut out of the sales. The effect will be less for those huge corporations selling online with big market capitalization but nevertheless, no matter how big or how small these businesses are, the sense of insecurity will always be there. Let’s face it, with this volatile scenario bitcoin can never become a viable monetary system and that’s a fact.
Trust and Reputation
Ever since the infamous Mt. Gox collapse, the trust rating for bitcoin is at an all time low and this presents a major concern especially when you take into account the number of people who lost their money. What becomes more profound is how this negative information gets passed along and any seeds of mistrust will develop into full-blown major scandal. This is further compounded by the fact that the Mt. Gox case is only the tip of iceberg because after the incident, there were a series of collapses involving exchanges with the latest scandal involving Bitpay in August 2015. This is where they claimed that substantial amount of bitcoins were lost via email hack. How ironic is it?
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