Cryptocurrencies have been one of the most important developments in the financial world in the past decade. However, not everyone is bullish on them, particularly the largest cryptocurrency by market capitalization, Bitcoin. From the moment it emerged in 2009, Bitcoin has been dogged by some pretty vocal critics who have two basic criticisms — its irrational valuations and its utilization as a tool for illegal activities. This article will provide an 8 year overview of the Bitcoin skeptics by looking at the evolution of their viewpoint.
1. Introduction to Bitcoin Skeptics
Length: 250 words.
The term Bitcoin skeptic is a label applied to those who believe the potential of Bitcoin to be over-hyped and unrealistic. Bitcoin skeptics are wary of the volatile price of Bitcoin, lack of intrinsic value, and hint of a bubble before a crash. They believe that there is little chance of this digital currency becoming mainstream or even acceptable to conventional financial institutions.
Bitcoin skeptics have the view that any currency should involve backing from a government or central banking system. They feel that digital currencies like Bitcoin lack the fundamental ‘trust’ element, and can be seen by conventional financial institutions as illegal and unregulated. They find the concept of money generation within an algorithm that is inherently uncontrollable highly controversial.
The challenge for Bitcoin skeptics is that its popularity is still growing: it has established itself as a legitimate currency token to official exchanges, is highly recognizable, widely accepted, and increasingly adopted by merchants. What’s more, every day there are new products launched that’ll facilitate Bitcoin transactions, accessibility, and wider adoption.
- Volatile price of Bitcoin
- Little chance of mainstream acceptance
- Lack of backing from government or central banking system
- Money generation through an uncontrollable algorithm
- Growing popularity
- Legitimate token on exchanges
- Highly recognizeable by merchants
2. Rise of Bitcoin Skeptics in 2011
In 2011, widespread scepticism towards Bitcoin began to emerge as a result of its reliance on decentralised computing platforms. There were prominent voices in the industry who were sceptical of the prospects of Bitcoin as a mainstream payment system, with some even calling it a “gimmick”. Here are some factors that contributed to the scepticism:
- The lack of regulation surrounding its ownership and use
- The misconception that Bitcoin was mainly used as a way to fund criminal activities
- Regulators globally were unsure of how to regulate cryptocurrencies
- Concerns about the longevity of Bitcoin, given its high turnover rate
The doubts persisted for several years, with few voices brave enough to go against the grain and speak in favour of Bitcoin. These doubts were also shared amongst some of the bigger institutional players in the finance industry. Bank of America’s head of research in 2011, Karen Kwu, famously dubbed Bitcoin “the biggest Ponzi in history”. However, despite the scepticism, Bitcoin continued to wear down its opponents through its impressive growth in adoption.
3. Critical Bitcoin Voices of 2012
As Bitcoin gained traction in 2012, more and more voices were raised from all corners of the world and each had a different opinion on the controversial cryptocurrency. Some were enthusiastic and supportive, while others were critical and likened it to a scam.
One of the most prominent voices from the critical camp was Nobel Laureate Paul Krugman. He dubbed Bitcoin “evil” and equated it to a Ponzi scheme, describing it as “essentially useless” and something not backed by a central government.
Eric Posner, the University of Chicago professor of law, and Tyler Cowen, a renowned economics professor from George Mason University, also expressed their doubts. Cowen called it “an experiment gone bad”, an opinion shared by Posner who went as far as claiming that Bitcoin is a “bust” and would fail in the long run.
Others included:
- MIT technology review dismissing Bitcoin as nothing more than speculative investments
- University of California’s finance professor, Galen Burghardt stepping forward to voice his concerns about Bitcoin’s lack of intrinsic value
- Barclays’ Tom Keleghan pronouncing Bitcoin as “deeply flawed”
4. Growing Widespread Skepticism over Bitcoin in 2013
Uncertainty for Bitcoin
The concept of Bitcoin had been gaining traction since its launch in 2009, but 2013 marked a tipping point. Negative news began to pour in, with more widespread skepticism being expressed. Amidst the doubts, the underlying technology driving Bitcoin began to solidify, leaving many of the skeptics wondering if Bitcoin was here to stay.
The growing skepticism began early on in the investigative piece by Forbes Magazine in January of 2013. The article highlighted problems with the currency’s security and its association with money laundering and other criminal activities. Established financial institutions, like Goldman Sachs, were also sceptical of Bitcoin’s long-term prospects and instead saw it as a ‘niche product’ that did not have a large place in global finance.
In the following months, some governments decided to jump in and regulate Bitcoin. In September, the U.S Treasury classified Bitcoin as a ‘virtual currency’, enforcing Anti Money Laundering (AML) regulations. Germany and France followed up with respective rulings, essentially giving Bitcoin the same legal status of a currency.
Though these rulings may have been seen as positive news, they ultimately resulted in more widespread wariness due to the introduction of government regulations. With the heightened scrutiny, concerns over Bitcoin’s stability only increased.
5. New Debate Around Bitcoin Gains Momentum in 2014
The world of Bitcoin has been rapidly innovating in 2014, and this has kept the debate around it vibrant and fueled with a passion unseen in the cryptocurrency world. 2014 has seen a growth in Bitcoin’s userbase, an increase in the number of businesses accepting it, and a substantial jump in its total value. In this article, we outline the key talking points of the Bitcoin debate in 2014.
Regulation & Legal Status
At the core of the Bitcoin discussion is the need to regulate the digital currency and clearly define its legal status around the world. This has been a heated topic of discussion throughout the year, with a range of different views being offered. Governments, financial institutions, and Bitcoin advocates alike have all had their input.
One of the main points of debate is whether or not Bitcoin should be treated as a currency or as a commodity. Some governments, such as the United States, are treating it as a hybrid, but there is no definitive answer yet.
Increasing Support
Despite debates regarding the legal status of Bitcoin, more businesses have been announcing their support for it this year. Major companies including Microsoft, Dell, and PayPal have all expressed interest in accepting Bitcoin for goods or services. This is a sign that it has the potential to go mainstream.
On top of this, Bitcoin adoption has been seen to grow. An increasing number of people have begun using it either as an investment or for day-to-day purchases. This has seen total Bitcoin transactions nearly double from the beginning of 2014 to the present.
Outlook on Price
The final element of the Bitcoin debate has been the rate of its price appreciation. We’ve seen an amazing rise in its value this year, from just over a thousand to almost a million dollars per Bitcoin. This has given rise to concerns regarding a potential bubble, and questions of when it will burst.
The outlook on Bitcoin’s price going forward has been very mixed. Most analysts agree that it is too unstable to be used as a long-term investment, and that it is more likely to experience sharp short-term gains and losses. However, no one is able to make any definite predictions on the future course of Bitcoin’s price.
6. Bitcoin Skepticism Remains Prevalent in 2015-2019
Despite the rise of Bitcoin’s use, there remains skepticism of its future, especially among more traditional financial institutions. Many governments have chosen to monitor the progress of digital currencies, rather than legalize their trading and exchanges.
Changes in government regulations has created some doubt in the cryptocurrency markets during 2015-2019. As governments and regulators establish a more solid infrastructure for Bitcoin, there is still, however, a significant amount of mistrust among traditional financial institutions. Many of these institutions are not willing to risk their reputations on the trading of digital currencies.
- Strict Regulations – It has become increasingly difficult to send and receive money from Bitcoin exchanges and miners. Governments and regulators have created a string of rules and regulations that make it difficult for exchanges to function and transfers to be made.
- Lack of Transparency – The decentralized nature of cryptocurrency have some people concerned about the lack of transparency. Without government oversight, there is a fair amount of speculation about who is buying and selling the currency.
- Volatility – The value of cryptocurrency is notoriously volatile. Many people fear it makes trading too risky and undermines its legitimacy as a currency.
Therefore, while there is more acceptance and adoption of Bitcoin, skepticism remains prevalent in 2015-2019.
As digital currencies continue to grow in popularity, the skepticism surrounding Bitcoin and other cryptocurrency platforms will likewise evolve and shift. While Bitcoin experienced a great deal of criticism in its early years, its staying power and gradual mainstream acceptance prove that it will likely be here to stay.