Trey hand is traded on over 100 unregulated exchanges,

Trey AlbaniMrs. HenryAP English: Period 1/13/18The Down Fall of BitcoinGreetings everyone,How would you feel putting your hard earned money into an investment with absolutely no intrinsic value? An investment that in essence is worthless. Well, this is what thousands to millions of people are implementing through the digital currency Bitcoin. A digital currency, or cryptocurrency, is a type of currency available only in digital form, not in a physical form such as coins. It exhibits properties similar to physical currencies, but allows for instantaneous transactions and borderless transfer of ownership (Wikipedia). Since its inception, Bitcoin, “a purely peer-to-peer version of electronic cash” (Tucker), has developed into arguably the most well known digital currency to date. That being said, it is also the most controversial. Many questions arise about Bitcoins. Are they real? Will they be sustainable over the long term? Will the central banks and governments allow this rogue currency to continue in an unregulated environment? In my opinion, the answer is no. At the moment, Bitcoin and other digital currencies are nothing more than pure speculation and remain problematic for many reasons. And for that reason, it is evident that Bitcoin is not a fundamentally sound investment.First, Bitcoins faulty interfaces cause it not only to be hard for consumers to invest in, but also making it very vulnerable to hacking. Although Bitcoin has created an immense market, worth billions of dollars, there still is no safe and traditional way to invest unlike other investments. Take stocks and bonds for example, the stock market contains 16 impenetrable and regulated exchanges where investors can buy and sell stock extremely easily. Bitcoin on the other hand is traded on over 100 unregulated exchanges, each one being very unsafe and susceptible of hacks. Because of the unsafe exchanges, Bitcoin suggests to download your Bitcoins to hand held cryptocurrency hardware wallets, such as the Ledger Nano S. This process is very inconvenient and makes investing even more confusing for consumers. One of the largest hacks that occured was upon Bitcoins so called, largest and strongest exchanges, Mt. Gox. By the beginning of 2014 they handled 70% of all Bitcoin transactions, holding as much as 800,000 Bitcoins. This all changed on February 10, 2014 when Mt. Gox issued a press release stating that 740,000 Bitcoins had gone missing. This equated to 6 percent of the outstanding currency and worth approximately 12 billion dollars today (Norry). Many analysts say that the hack came down to, ¨an unconscionable neglect of fiduciary duty.¨ meaning being irresponsible with others assets (Song). Unfortunately, some people lost thousands while others lost millions of dollars in this hack. Aside from Mt. Gox, there have been other hacks that have inflicted considerable damage, such as the Bitfinex hack. Bitfinex was known as an, ¨opaque operation that provides no information on its website about where it is or who operates the company.¨ (Lee). This left consumers to trust bitfinex with their money, despite knowing no information about the exchange. This ended up being a costly mistake. In August 2016, Bitfinex lost 120,000 Bitcoins to hackers do to a faulty security system (Lee). Not only that but the remaining users were forced to reduce the value of their deposits by 36 percent, in Bitfenix´s effort to stay afloat (Lee). In Bitcoins short life time of just 9 years, they have experienced over 10 hacks on their exchanges. In contrast, the stock market has been running for 201 years, and has never experienced a hack on any of their exchanges. In the end given the plenty of options available with more secure interfaces, its very hard to endorse Bitcoin given one of the fundamental tenets of investing, is preservation of principal.Secondly, Although many investors have made staggering gains in a short period of time – over 5000% returns and even minting new billionaires overnight – the extreme and violent volatility has high potential for quick and sudden losses. Since January of 2017, bitcoins value has increased by 14,200 dollars. This may make consumers enticed to invest, but they have to take in consideration that high volatility coincides with extreme price drop. For example just on December 22 of 2017, Bitcoin, after reaching an all time high, lost a third of its entire value by plumitting 9,000 dollars (Shane). This severe price fluctuation is also due to the fact that Bitcoin has become a bubble, driven by speculation. Speculation is when people buy something without any consideration of its underlying value or its appropriateness of its price, solely because they think others will pay more for its in the future (Marks). This has caused a vast array of people investing in Bitcoin through speculation. A huge population of Bitcoins speculative investors are young adults, in college and high school. They are using Bitcoin as a means most similar to gambling, buying then selling immediately after they make a profit. The problem is that this ¨get money fast¨ approach to Bitcoin, is what formed it into a bubble. The Bitcoin Bubble is most comparable to the internet bubble in the 1990’s. Just like Bitcoin, the creation of a new technology, in this case the internet, caused the values of many dot-com companies to soar due to speculation and FOMO (fear of missing out). Inevitably the internet bubble burst. Almost all dot-com companies lost 80 to 100% of their value and were forced to file for bankruptcy. This left just a small band of surviving companies. With clear similarities to the internet bubble, the Bitcoin bubble will have a similar unavoidable end involving catastrophic loses. Clearly, while Bitcoins volatile prices may seem like a chance to earn money fast, the high risk of losing your money far outweighs that the rewards.Bitcoins lack of government regulation and decentralization of exchanges in the long term will fail. Since Bitcoin emerged it have strived to be a currency with no government interactions, insurance coverage, and overall being self contained and un-collateralized. Because of Bitcoins anonymity, criminals are able to perform large transactions of millions of dollars outside of law enforcements and the government’s view. A clear example of this was through the cyber ransom attack, Wannacry. Wannacry targeted computers running the Microsoft Windows operating system by encrypting data and demanding ransom payments in the Bitcoin cryptocurrency (Wikipedia). Over 300,000 people were affected by Wannacry, their personal and significant files were in jeopardy of being erased. With no government regulations on Bitcoin, the hackers were able to directly receive the Bitcoin and cash out completely anonymous. If governments continue to find out that criminals and or terrorist are using Bitcoin to fund their activities, it will prompt an immediate crack down by governments around the world (Motley Fool). South Korea, which contains one of the largest Bitcoin market as of January 2018, started to discuss and consider making the trade of Bitcoin illegal through the ban of Bitcoin exchanges (Derousseau). China as well has discussed and outlined proposals to eliminate Bitcoin Mining, which is a fundamental and essential part to Bitcoin transactions. The US has also quietly began to draft a bill, stating ¨(A) discussion of and data regarding trends in illicit finance, including evolving forms of value transfer such as so-called cryptocurrencies, other methods that are computer, telecommunications, or internet-based, cybercrime, or any other threats that the Secretary may choose to identify.¨(ZeroHedge). More simply this bill will apply government regulation to Bitcoin and as well as other cryptocurrencies. With the whole point of Bitcoin being to have no need of central authority, the likely increase of government regulations in the future will reduce the purpose Bitcoin has (Gimein). Overall, Bitcoins goal of being a completely independent currency from the central government will not be achieved in the long term.In conclusion, investing in the cryptocurrency bitcoin would be a very detrimental decision in the long run. In time, the Bitcoin bubble will burst causing a significant loss in value. Along with that, the government will begin regulating Bitcoin and as well as other digital currencies. This attempt would eliminate the fraudulent behavior and the possibility of millions of investors losing thousands of dollars set aside for monthly bills, college education and/or retirement. Although there will always be unreliable and risky businesses, staying clear of digital currencies and especially Bitcoin will be an intelligent decision.


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