Bitcoin won't solve the worlds financial problems! Why I'm not buying BTC and what you should do.

Updated: Jul 16, 2019

I found the following picture on reddit:

Source: https://www.reddit.com/r/CryptoCurrency/comments/bejoqk/ask_for_bitcoin_when_you_buy/

It looks nice, but it made me think: Are these points actually true, or is it just sales talk?


This will probalby be a very unpopular opinion but, I must state it is as I hold it to be true. This poster's selling points of Bitcoin are almost all false.


Let's go from the top down:


Hyper-inflation: First of all it could be argued that all the forks of BTC are inflationary to BTC as it devalues the original BTC by splitting the community and diluting the brand. Just imagine if an off-shoot of the fed started issuing another USD. More importantly, however, we just saw BTC drop ~84% from all time high. This is the very definition of Hyper-Inflation:

"In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, often the US Dollar." (https://en.wikipedia.org/wiki/Hyperinflation)

Sounds almost exactly like what happend to BTC during the crash. Also even if BTC would be deflationary, that is not good either, and may actually be even worse. The ideal currency would have a small rate of inflation to encourage spending and investing so that the economy can grow. A deflationary currency encourages people to hoard it which is not good for the economy. Volatility in general is not good as it is unpredictable, which is the opposite of what you want in a currency and in an economy. The more predictable and economy is, the easier it is for institutions, companies, individuals and the government to invest and act rationaly.


Unsustainable debt: Firstly, there are many economists arguing that the debt in the world is not unsustainable. I won't go any further into this discussion here as it is to complex for just a few sentences. However, there is no reason why the high ammount of global debt would not be there because of BTC as BTC can also be borrowed. Maybe if the entire world switched to BTC, the value of global debt would decline as it is mostly in USD and USD would loose a lot of value in that case. But in time, nations, corporations and people would create a new situation of "unsustainable debt".


Bail-outs for crooked bankers: Governments will always bail out corporations that are vital to the nation (e.g. banks, tele communications etc.) because they provide infrastructure that is needed so to not risk national security. It can be argued that BTC would remove the need for banks, but even then, other big financial institutions would still exist and keep getting bailed out.


Overdraft and withdrawal fees: BTC has huge fees, and everytime you want to trade/withdraw you pay fees to exchanges. I don't know which banks you use, but I pay nothing in fees, and never have done so in my entire life. For normal customers they charge ~25$ a year for your card and small fees for transfers outside the EU, but that's it. I am sure BTC can lower fees for some people, but for me, and many others, using BTC would cost a lot more than a normal bank.


Monthly service charges: Same thing here as with overdraft and withdrawal fees.


Bitcoin is not a cure for the world's financial problems. I am afraid there is no easy cure for that. As with many complex issues, easy answers are attractive but seldom effective. Blockchain can be used to greatly improve the worlds financial systems which in turn will improve the health of the global economy, but to solve all the above issues much more needs to be done.


I am not saying Bitcoin is worthless. It definitely is not. BTC is good for online purchases, especially illegal ones, offline illegal purchases as well. It is good for many people in nations which do not have a good financial system in place. However, there are other cryptos that can do this faster and cheaper. Though, Bitcoins advantage is its acceptance.


BTC also works well as an index for the general crypto market. It can also have a collectors value with a supply of only 21 million minus lost coins. It has a well established brand and many new crypto investors get in through Bitcoin and more established investors want to hold at least some Bitcoin as a hedge. It is also the main currency for trading in cryptos and can be seen as the reserve currency of the crypto sphere.


So there is negatives and postives, like anything else. But what can you take from this as an investor?


BTC can be a good investment, but not because it is groundbreaking and will cure the financial problems of the world. It may be a good investment because it is the most established cryptocurrency in the world and thus is the most accepted for purchasing and is bought by many as a hedge or to trade with other currencies. However I am not investing in BTC because the goal for my crypto portfolio is to bring high-risk exposure to new technology that has huge potential. With the rapid evolution of blockchain Bitcoin is old technology by now and is seen as the "safe alternative". For my safe investments I hold stocks, bonds and other debt.


That said, Bitcoin is not a bad investment, it just does not fit into the purpose of my crypto portfolio. (I actually make a case for BTC as an investment here: thedecrypter.com) have safer investments in stocks and other assets. You need to asses the purpose of your portfolio and decide for yourself if Bitcoin is something for you.




Happy investing!


/Alex - TheDecrypter.



Note: Invest at your own risk and always make sure to research your investments thoroughly.