Daniel Halliday
Jul 24 · Last update 3 mo. ago.
Is bitcoin a speculative bubble?
Can cryptocurrencies work to the extent that they could be viable as a currency? Or are they all just a speculative bubble?
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Bitcoin has no intrinsic value, doesn’t work as a currency and will inevitably crash as an asset
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Bitcoin and blockchain’s decentralised database technology will lead to an environmental disaster
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Cryptocurrencies are a concept that cannot be compared to how we use currencies today
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It may well be, but it still has uses and blockchain technology will be revolutionary
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Bitcoin has no intrinsic value, doesn’t work as a currency and will inevitably crash as an asset

To be used as money successfully cryptocurrencies including bitcoin need to function as a medium by which value can be exchanged. For monetary systems to operate it is imperative that money holds some steady degree of value over time, so that loans and payments over time can be arranged. Bitcoin is too volatile to function in this way, with no intrinsic value, and therefore is functioning as a speculative asset, not as a viable currency.

Speculative bubbles refer to a financial crisis in which speculation of an asset’s value far exceeds its intrinsic value. This situation can be first noted in 17th and 18th centuries, initially with the sale of certain fashionable tulip bulbs in Holland, prices going beyond the average yearly salary before crashing spectacularly. Similarly the British South Sea company, who were granted a monopoly over trade in South America despite Britain’s involvement in a War with the Spanish at the time, who were in control of South America. Regardless of this contradiction, stocks in the company were traded at increasing prices, despite no British trade occurring in South America. This is arguably a similar pattern to bitcoin trading...

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Daniel Halliday
Aug 26
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DH edited this paragraph
To be used as money successfully cryptocurrencies including bitcoin need to function as a medium by which value can be exchanged. For monetary systems to operate it is imperative that money holds some steady degree of value over time, so that loans and payments over time can be arranged. Bitcoin is too volatile to function in this way, with no intrinsic value, and therefore is functioning as a speculative asset, not as a viable currency.
Bitcoin and blockchain’s decentralised database technology will lead to an environmental disaster

With the already monumental energy consumption this technology requires, and the accelerating rate of growth of blockchain technology, many have warned of what a big environmental disaster blockchain technology could represent. As so much computing power is needed across many servers to verify a decentralised blockchain database, the power consumption of Bitcoin mining alone is thought to currently be greater than some countries. This would mean that Bitcoin alone is already responsible for several million tonnes of carbon emissions, and with the popularity and implementation of this technology growing, this problem will only get worse.

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Cryptocurrencies are a concept that cannot be compared to how we use currencies today

There is an inherent flaw in arguing that bitcoin is a speculative bubble, and not having intrinsic value, without accepting that fiat money is also subject to this same criticism. If it wasn’t speculative and was backed by a physical asset, it would be impossible to keep it decentralised, which is the most exciting prospect with bitcoin or other cryptocurrencies. Such currencies are a new concept that defy definition by previous limitations imposed on currency, there use may change as the technology and society does, but they are more than just a speculative asset.

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It may well be, but it still has uses and blockchain technology will be revolutionary

Blockchain will have applications despite bitcoin’s success. Even if blockchain currencies do not overtake fiat currency, blockchain’s model of secure decentralised storage of data will revolutionise secure database technology. It is set to revolutionise how contracts, banks, and artistic royalties function (and is likely to diversify in time).

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