Cryptocurrencies have emerged as a credible alternative to the conventional monetary system powered by fiat currencies across the globe. Virtual coins are based on decentralized blockchain technology and thanks to the absence of any third party dominance, these can be used seamlessly in cross-border transactions without any significant processing fee.
Among a large number of digital coins, Bitcoin is the most famous as well as dominating digital currency. It is the largest coin by market capitalization and by far the most loved one among crypto enthusiasts. In fact, it won’t be an exaggeration to say that Bitcoin is the digital currency that started the digital coin revolution and now playing an important role in furthering the adoption prospects of crypto among the masses.
Issues Plaguing Bitcoin
That said, Bitcoin has had its share of issues in the past and in fact, these problems continue to persist even today. We highlight some of the key issues that are still plaguing Bitcoin and awareness of these issues will help you to make an informed choice.
1) Deflationary Aspect: Unlike other fiat currencies that are built on the inflationary aspect, Bitcoin has an inherent building of a deflationary model. This essentially means that the number of Bitcoin will keep on decreasing and its mining will stop once it reaches the number 21,000,000. This deflationary characteristic tends to promote hoarding tendency, which, in turn, is a precursor of the debt increase and economic crashes. You must keep in mind this aspect and, accordingly, plan your purchase of Bitcoin.
2) Vulnerability to Technical Flaws: Bitcoin is evolving as the technology underpinning the digital coin is in the continuous phase of development. This means that the probability of encountering the technical flaw at any point in time cannot be ruled out. If that happens, the whole community owning Bitcoin could land itself in trouble and the exploiter can take advantage of that situation.
3) Value fluctuation: This is a matter of great concern, and in fact, the continuous fluctuation in the value of Bitcoin and for that matter, all digital coins are a major stumbling block in the adoption potential of cryptocurrencies around the globe. The fluctuation pattern is very steep in the case of Bitcoin as it attained its highest value of around $20,000 in December 2017 and then came crashing down with its value plummeting by 70% in the very next year 2018. The current value of Bitcoin is hovering at around $9,672 and the continuous fluctuation in value is a cause of concern for investors.
4) Lack of Physical Form: Bitcoin and other cryptocurrencies are digital in nature that essentially means they don’t have any physical form or tangibility aspect. You cannot store the money offline and the presence of only digital form makes Bitcoin more vulnerable to online theft and scam. Further, the intangibility form of this digital money has not gone down well with many conventional investors who feel more comfortable with the hard cash or physical money.
5) Lack of Policy and Regulations: Bitcoin is largely unregulated and there is no clear cut policy of the government towards digital coins. As the cryptocurrency sector is ever-evolving, governments find it difficult to frame the rules and regulations. This lack of intervention is good from a decentralized perspective, but on the flip side, it might encourage unscrupulous elements to sneak in and take advantage of the unregulated market.
6) Money laundering: Closely related to the aspect of the unregulated nature of Bitcoin is the menace of money laundering and other allied crimes such as extortions. It is difficult to get the trail of the money and this is the reason why Bitcoin and other cryptocurrencies are emerging as hot favorite for the money launderers and extortionists around the globe.
7) Impact on the world economy: By emerging as a credible alternative to the conventional monetary system, Bitcoin could negatively impact the world economy by strengthening a parallel digital economy. And if the opposition of governments and regulatory agencies continues to remain firm against Bitcoin, then this would further complicate things.
Before you start investing in Bitcoin, it is imperative for you to have a look into some of the key issues that the digital coin is facing. These are important as these could have a potential impact on your investment and potential future gains. You must make yourself aware of the complexities of the digital currency and then make decisions to go ahead and take a plunge.