Bitcoin has been on the mouths of tech enthusiasts in the last few months due to establishing its worth on the market as high as $19,000, a value no other currency has ever reached in history. Many are waiting for the “bubble to burst,” but in this article, I’ll examine what events can be a direct cause for a downswing in Bitcoin’s price, both in the short and long term.
Government Regulation or Ban
Government regulation has been on the minds of crypto enthusiasts ever since Bitcoin and its smaller brethren started to gain traction. As it stands right now, the non-existent regulation and decentralized nature are some of the main draws of Bitcoin; thus, any sort of meaningful government interference would certainly have an impact on its value, even if it was a temporary one.
How big this impact would be would much depend on the type of regulation at play, and which countries would join in on it.
On the flipside, governments have always been slow on the uptake when it comes to understanding new technologies, especially a complex one such as cryptocurrency. In the past, there have been attempts at regulation, yet folks were quick to find loopholes and Bitcoin’s price kept rising to unprecedented heights.
Bitcoin works independently; it is not connected to any country or financial entity. Without a specific location to target, any sort of attempt at regulation would require a massive global undertaking.
The Rise of Different Cryptocurrencies and Technologies
Bitcoin was one of the first of its kind, which is why it’s still the most successful and valuable cryptocurrency out there. However, new alternative currencies based on the same Blockchain protocol, such as Bitcoin Cash, Litecoin, and hundreds of others, are already having an effect of reducing its value and making investors turn away.
One such example as of late is IOTA, which is based on the complex Tangle protocol, offering several advantages over Blockchain tech.
The Blockchain protocol is somewhat limited in its capacity, as it depends on how fast miners can mine one block, which limits the number of transactions. The Tangle protocol, on the other hand, completely eliminates mining, leading to much faster transaction times and zero fees.
This is why many people are jumping ship to IOTA, but this tech is still in its infancy stage, and it needs to solve some of its problems. The caveat is that the quickness of Tangle transactions simply depends on the number of active users. Therefore, it’s vital that IOTA solves its accessibility and user-friendliness issues, and of course it needs a bit of luck to take off in the saturated cryptocurrency market.
Rising Memory Pool Leading to Absurdly High Fees and Transaction Times
One of Bitcoin’s main problems is the fact that the transaction fees get higher as more and more people use it. This is because, as I mentioned before, the number of transactions per second is limited, as miners can only work so fast to process said transactions.
This is why people are starting to be faced with transaction fees hovering around the $20 mark, and they can only get higher. This also affects processing times, as sometimes you have to wait quite a bit for your transaction to be completed. Bitcoin competitors have eliminated this problem from the get-go, making them more desirable for small/micro transactions.
This problem isn’t completely unsolvable, but it’s not easy either. We will have to wait and see how Bitcoin tackles the ever-rising fees and transaction times in the future.
Will Bitcoin remain the #1 cryptocurrency in the future? Will people simply get bored and forget about it, leading to a steady plummet until it’s worth nothing, while other cryptocurrencies emerge victorious? These and many other questions are still on the minds of cryptocurrency enthusiasts, and perhaps the most exciting part is that nobody can predict what will happen.
If you are reading this article in hopes of learning whether or not to invest in Bitcoin, my advice would be to treat said investment as expendable, without expecting any return — e.g., a gamble.