Using Bitcoin as a traditional currency is not straightforward. The world’s leading cryptocurrency doesn’t have the traction of other popular payment methods. Its current market trend makes it more reminiscent of gold, which doesn’t bode well for its future mainstream appeal.
Bitcoin Is a Lot like Gold
Correlations between Bitcoin and gold have been drawn multiple times over the years. Both forms of value are scarce and require a process known as mining. In Bitcoin’s case, that process is completely digital. To a lot of investors, Bitcoin and gold are both excellent stores of value. That is a bit odd, given Bitcoin’s volatile nature.
The limited number of BTC to be brought into circulation sparks many debates. Some see it as beneficial, whereas others deem it a limiting factor. A deflationary form of value has a tough time succeeding as a currency. Gold, while also relatively scarce, is equally deflationary. It is not commonly used for payments or transactions, yet has a positive expected return.
Keeping that in mind, the future looks bright for Bitcoin. If a positive return is to be expected, the value per BTC should rise in the coming years. It is that outlook which makes Bitcoin and gold two peas in the same pod. Unfortunately, that trend also makes cryptocurrency far less useful as money. There will also always be a Bitcoin community, but it mainly attracts speculators, rather than actual users.
The Future of Fiat Currency
Replacing fiat currency is not something Bitcoin can achieve easily. Although the cryptocurrency is a viable payment method, few retailers officially accept it. Destabilized regions often show an appetite for cryptocurrency due to a crashing national currency. Venezuela is a good example, as its adoption of cryptocurrency has spiked over the past two years.
Given the current market conditions, Bitcoin shouldn’t be used as a real currency. Its value fluctuates too much to make it a viable means of payment on a large scale. Additionally, the underlying technology doesn’t support a large number of transactions. As much as BTC and gold are alike in this regard, their paths can still separate sooner or later.
For Bitcoin, the future remains uncertain. Its value can skyrocket or hit single-digits at any given time. On the other hand, major technical upgrades are looming around the corner. Those will make their mark on the cryptocurrency industry as a whole. The coming decade will determine if Bitcoin is akin to gold or a threat to regular money. Either scenario can spell a positive future for the world’s leading cryptocurrency.
Do you think Bitcoin is similar to gold? Let us know in the comments below.
Images courtesy of Shutterstock.