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5 Reasons Bitcoin Won't Survive

By Investing.com (Jesse Cohen/Investing.com)CryptocurrencyJan 22, 2018 04:02AM ET
www.investing.com/analysis/5-reasons-bitcoin-wont-survive-200282110
5 Reasons Bitcoin Won't Survive
By Investing.com (Jesse Cohen/Investing.com)   |  Jan 22, 2018 04:02AM ET
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Bitcoin, arguably the world's most popular cryptocurrency, has endured a rough 2018 so far. After enjoying a banner year in 2017, prices are down about 20% so far this year.

At around $11,500, the price of one Bitcoin is more than 40% below its record high of around $20,000 touched in mid-December, wiping approximately $140 billion off its market cap.

BTCUSD's Collapse in 2018
BTCUSD's Collapse in 2018

Besides its recent price correction, Bitcoin has also lost its dominance in the cryptocurrency market and now only holds a roughly 32% share, significantly lower than the 85% it held at its peak last year.

While it's still too early to proclaim that the Bitcoin party is over, it certainly feels as if future prospects are shifting from bright to dark for the world's most valuable digital coin. Below are the five factors that have the potential to lead to the demise of Bitcoin.

1. Slowing Transaction Times

Right now, it takes an average time of around 200 minutes to confirm a single Bitcoin transaction, according to Blockchain.com. The average time for the month of December was a whopping 2,322 minutes, or roughly 38 hours, with market experts blaming the unprecedented interest in the digital currency for clogging up the blockchain network.

Avg. Confirmation Time of Bitcoin Transactions 1/2017-12/2017
Avg. Confirmation Time of Bitcoin Transactions 1/2017-12/2017

Slow transaction speeds have led to a number of splits in the original Bitcoin blockchain. In August, the blockchain was forced to split in two in an event known as a "hard fork." This led to the creation of a Bitcoin spinoff called Bitcoin Cash. Another fork occurred in October, birthing another Bitcoin offshoot called Bitcoin Gold, as the community attempted to take measures to increase the size of blocks on the network.

In comparison, Ripple’s network can settle up to 1,500 transactions every second. Other alt-coins also have the ability to enable transactions in seconds. For instance, an Ethereum transaction takes under 20 seconds to confirm.

However, those figures pale in comparison to traditional payment service giants like Visa (NYSE:V), which can confirm up to 24,000 transactions per second.

2. Skyrocketing Fees

Skyrocketing transaction fees are fundamentally changing Bitcoin. Originally, one of Bitcoin's biggest selling points was that transaction payments would be fast, convenient, and most importantly - cheap.

"The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions," wrote Bitcoin founder Satoshi Nakamoto in the white paper announcing the technology. Up until the beginning of 2017, Bitcoin fees tended to be well below $1. But in recent months, its growing popularity has outstripped the network's ability to cope with soaring demand.

As a result, the Bitcoin network as we know it today is radically different from what it was in its infancy. People are currently paying around $25 on average to make transactions using the digital currency, much higher than seen in the early days of 2017, according to data by BitInfoCharts.

Average Bitcoin Payment Fee, 2017
Average Bitcoin Payment Fee, 2017

In contrast, the cost of an average Ripple transaction fee is currently a fraction of a penny, while Litecoin and Bitcoin Cash boast an average transaction fee of 35 cents and 30 cents respectively.

This development has led to a growing number of merchants and businesses—who are trying to realize Satoshi's vision of Bitcoin as a platform for "small casual transactions"—to begin shifting away from BTC, toward alternative networks and other cryptocoins.

3. Tighter Rules and Regulations

After last year’s remarkable 1,900% rally, Bitcoin has started 2018 on a rocky note. Ongoing chatter of tighter rules and stricter regulations has rattled investor sentiment, especially in Asia.

South Korea, and just this past weekend India, were the latest countries to come out charging against Bitcoin trading, with South Korea's Justice Minister saying that the government was considering a “ban” on cryptocurrency trading. Many of India's largest private banks have suspended cryptocurrency exchange accounts tied to Bitcoin trade. Law enforcement agencies in South Korea also began investigating the country’s largest exchanges for tax evasion.

China effected a similar ban last year and has recently signaled that it will escalate its clampdown on cryptocurrency trading, targeting online platforms and mobile apps that offer exchange-like services.

Adding to fears over rising scrutiny from global regulators, a director at Germany's central bank said this week that any attempt to regulate cryptocurrencies must be on a global scale, as national or regional rules would be hard to enforce on a virtual, borderless community.

Bitcoin Legality Around the World
Bitcoin Legality Around the World

While the cryptocurrency has sidestepped similar obstacles in the past, a joint effort from the world's leading governments and regulatory authorities aimed at tackling the issue can potentially be the straw that finally breaks Bitcoin's back.

4. Mining Problems

China’s government is planning to shut down Bitcoin miners as part of its latest crackdown on the cryptocurrency. On January 10, the Leading Group of Internet Financial Risks Remediation requested that local governments make an “orderly exit” from the industry.

The news is significant because China mines about 60% of the world’s Bitcoins, making it by far the biggest Bitcoin mining country in the world. The fact that the majority of Bitcoin mining occurs in China could bring chaos to the Bitcoin community.

Bitcoin Mining Pool Locations
Bitcoin Mining Pool Locations

Another cause for concern: one Bitcoin mining session originally created 50 Bitcoins, then the number dropped to 25 and now it stands at roughly 12.5. Some forecast that by 2020, it will fall to 6.25 Bitcoins which will make mining unprofitable.

If Bitcoin isn’t mined, transactions aren’t approved and new Bitcoins aren’t produced. Over 16,800,000 Bitcoins have been mined as of January 13, getting close to the maximum amount of 21 million coins mined. Once all of the Bitcoins are mined it means supply can no longer grow.

5. Loss of Anonymity

Early on, one of the most appealing aspects about Bitcoin was its anonymity. That, however, seems to be changing rapidly, with regulators and tax authorities leaning toward forcing traders to disclose their true identities.

South Korea has just announced a major change to cryptocurrency trading, stating that everyone within the nation who trades will need to use their real name. Indeed, any scheme that reduces the anonymity of Bitcoin transactions could strip away much of the cryptocurrency’s appeal.

In November 2017, leading cryptocurrency exchange Coinbase suffered a major defeat at the hands of the U.S. Internal Revenue Service (IRS), when a California federal court ordered the exchange to turn over identifying records for all users who have bought, sold, sent, or received more than $20,000 through their accounts in a single year between 2013 and 2015.

The FBI has also made it very clear that they are watching Bitcoin very closely, and are getting better and better at finding the true identities of the people who use it for illegal activity. In light of the threat it poses to tax collection as well as mounting fears by law enforcement of its ability to fuel illicit markets, it would not be a surprise for authorities around the world to get even tougher on Bitcoin.

With all that being said, it doesn't appear that cryptos are going away anytime soon. Our bet is that in the long run, the blockchain technology on which Bitcoin is built will thrive, but the price of the coin itself will collapse, causing it to be supplanted by one of its more efficient, younger cousins. While no one knows for sure, we believe the altcoins that have the best shot at becoming the next market leader in place of Bitcoin are Ripple, Dash and NEM.

In recent months, Ripple has signed up several additional financial institutions to its blockchain network, bringing its clientele to more than 100, including big-name financials like Spain's Santander (NYSE:SAN), Italy's UniCredit (OTC:UNCFY), Switzerland's UBS Group (NYSE:UBS) and the UK's Standard Chartered (OTC:SCBFF). More financial institutions are reportedly set to join Ripple's growing global network this year, as it allows banks to settle cross-border payments faster and more cheaply than they currently do via conventional global payment networks.

The main appeal behind Ripple is that it connects banks, payment providers, digital asset exchanges and corporates via its distributed ledger network, RippleNet, to provide one frictionless experience to send money globally.

Dash has been in the headlines thanks to indications of growing acceptance by online vendors and even physical stores to accept it as a form of payment.So far, the cryptocurrency can be used at over 100 websites and 300 physical stores to purchase goods or services.

Dash offers all the same features as Bitcoin but also has advanced capabilities that solve many of the problems found in its older cousin, including instant transactions, which make it a more attractive payment option.

Finally, the NEM blockchain software is currently used in a commercial blockchain called Mijin, which is being tested by financial institutions and private companies in Japan and internationally. The developers claim that it will reduce banking institutional costs by 90% while making the banking industry more secure.

5 Reasons Bitcoin Won't Survive
 
5 Reasons Bitcoin Won't Survive

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Ronin Trader
Ronin Trader Jan 24, 2018 7:17PM ET
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The lightning network will remediate a lot of the slow transactions and the fees. Of course, if you did your research you would have been able to put that in your article instead of peddling Dash and Ripple.
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Brooks Little
Brooks Little Jan 23, 2018 6:35PM ET
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and the US dollar is going down too. The world is gradually moving to digital currency. But I'll support you. Go ahead and keep printing garbage. The 1% of us in this will be 13% EOY.
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A Yeoh
A Yeoh Jan 23, 2018 1:54PM ET
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Lightning network? Do your research before showing the entire world you don't know how to do your job.
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CTexplore CT
CTexplore CT Jan 23, 2018 1:17PM ET
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Down vote
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Havoc Revel ations
Havoc Revel ations Jan 23, 2018 1:16PM ET
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Indeed, this is a bad article. No facts and clearly no research done towards the bitcoin network. Still living pre-2008 here.
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Spencer Watkins
Spencer Watkins Jan 23, 2018 1:07PM ET
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Thank you for posting. Every time I see a Bitcoin is dead article I know the bottom is in and it's time to buy up the next leg.
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Luis Anaya
Luis Anaya Jan 23, 2018 9:55AM ET
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Bitshares and Quantum can process double of VISA transactions x second.
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Kenny Tsen
Kenny Tsen Jan 22, 2018 9:12PM ET
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Bad article with little to no facts and little to no understanding of what is to come. Try harder.
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2 2
Josh Peck
Josh Peck Jan 22, 2018 7:46PM ET
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Lightning network just came online, solving #1 and #2...If the author did not complete even a cursory survey /r/bitcoin of as part of his research, I'm not sure why he should be considered an authority on anything.  This article reads more like a list of the fears my in-laws had about Bitcoin when I told them about it than anything approaching analysis...Bitcoin may not survive, but it won't be for the reasons the uninformed author purports.
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Nikola Tesla
Nikola Tesla Jan 22, 2018 5:49PM ET
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The purpose of cryptocurrencies is to replace paper money. Still everybody purchase them to make some USD $$$. And that's why it can't survive.
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D D
D D Jan 22, 2018 4:01PM ET
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Regarding your 2nd point, dollars control for percentages. For example, if I pay 1% of a $100 purchase, then sell the same purchase for $10,000 later and my transaction fees stay the same, the fees are not skyrocketing. Seems like a spurious relationship. In correlation with your suggestions regarding the price of bitcoin, the fees should soon be sky-falling.
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1 1
Jan 22, 2018 3:23PM ET
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drive by readers, this is clickbait for the driven commenter's below. enjoy the free entertainment the commenter's and author provide. futures mkt is set to expire on near dates  so of course there's some relevant chatter, but not here. and, yes, i own ltc and have for almost two years.
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Hizami Ghazali
Hizami Ghazali Jan 22, 2018 8:16AM ET
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Notice that the author mention ripple at almost every reason? And how it is “better”? This is bank/ripple trying to brainwash to takeover the market cap.
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4 1
Chucky Change
Chucky Change Jan 22, 2018 7:55AM ET
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What the... Author deleted two of my comments where I pointed out that at least three of his claims are wrong.
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Jonny Blaze
Jonny Blaze Jan 22, 2018 7:55AM ET
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I still see your comments Chucky  ¯_(ツ)_/¯
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Dilip Jain
Dilip Jain Jan 22, 2018 7:54AM ET
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It will. It is Future of currency.
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B.G. Tercero
B.G. Tercero Jan 22, 2018 7:53AM ET
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Fake News. 237th obituary for Bitcoin
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Sangamesh Uppin
Sangamesh Uppin Jan 22, 2018 7:42AM ET
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Why you want Bitcoin not to survive. These are not facts but your dirty thoughts. King is always a king!
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Roman Bobaľ
Roman Bobaľ Jan 22, 2018 7:35AM ET
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i think that investors who previously invested in bitcoin, withdrew money they invested and are willing to buy less expensive cryptocurrencies such as Litecoin, ripple,ethereum and etc The biggest problem of cryptocurrencies is that they aren't used like fiat currencies and crypto currency will for some time serve just as a way to become rich. Investors will always withdraw their money from cryptocurrencies after it'll reach desired value.
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Denzel Heden
Denzel Heden Jan 22, 2018 7:27AM ET
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Great article. ...keep on the watch
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Chucky Change
Chucky Change Jan 22, 2018 7:27AM ET
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This article paints the right picture but the author does not have the right info on : 1) Ban of Cryptos in Korea - the Ministry of Finance is against such a ban and it could at take months, if not years before the ban becomes legislature. 2) China never banned mining but shut down mining companies that uses government funding or cheap electricity posing as cloud companies. 3) Bitcoin plans to fork again to combat the issue of slow processing but the Lightning Network where smaller transaction are registered locally and then processed on the network will enable micropayments that are fast and cheap. Especially the latter will mitigate the bottleneck Bitcoin has at the moment. True is that Ethereum (NEO is actually a better alternative), Ripple and others mentioned have a much better technology and especially partners. I expect Bitcoin to continue losing market share. There a better sources on the web like Quora, Reddit, ... to get info about Cryptos.
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N A
N A Jan 22, 2018 7:27AM ET
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+1
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Jurriën Diepenbroek
Jurriën Diepenbroek Jan 22, 2018 7:25AM ET
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Oh god.. not this fud again. First two points, fee's and speed are both getting solved by Bitcoin Lightning. Clearly the writer doesn't know this and thus has no clue what Bitcoin really is. Three and Five are both the cause by banks and governments that are just affraid for this new financial revolution, which will come! Four, the miner problem is the only thing to concern, but these big miners are moving to Canada. Bitcoin won't die, it never will. Bitcoin is not a bubble, it's the pin.
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Chucky Change
Chucky Change Jan 22, 2018 7:25AM ET
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Absolutely right, I forgot to mention this in my comment. Mining in Bitcoin will continue as long as it is profitable. It has become harder for the individual as companies have the economy of scale and operate in locations where chaep electricity is available. Mining Ethereum and other altcoins is picking up world wide.
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wes stewart
wes stewart Jan 22, 2018 7:24AM ET
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I wonder what the writers net worth is?
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Jonny Blaze
Jonny Blaze Jan 22, 2018 7:24AM ET
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I've been saying the same thing lately. Just ask yourself how many of the early dot.com names survived and are still around today? Cryptos won't disappear, but bitcoin will.
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jiko jiko
jiko jiko Jan 22, 2018 7:21AM ET
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how absurd is this article.... "5 reasons Bitcoin wont survive"? Who is the journalist signing this article? Was it a paid article? ..If this article would be legit, at least, it would mention Lightning Network development which is in fact responsible for putting down 3 of the 5 above arguments... the other 2 are part of the needed regulation. ..Pssssssfffff...
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Jayme Pereira Nunes
Jayme Pereira Nunes Jan 22, 2018 7:19AM ET
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And you are?
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