Ordinarily, a 10th anniversary is a cause for celebration and reflection. But there were few accolades for Bitcoin in 2018. That year, Bitcoin celebrated 10 years since Satoshi Nakamoto introduced the digital currency in response to the global financial crisis. By decentralizing the financial ecosystem, Nakamoto attempted to shift the balance of power from a select group of financial institutions to the wider public.
But has Bitcoin proven to be useless, or is it an innovation delivering its promise of changing the world of finance as we know it? Learn some of the arguments for and against Bitcoin’s usefulness.
- The years 2020 through 2022 were particularly tumultuous for the entire cryptocurrency industry.
- Bitcoin’s price soared as high as $68,789, then dropped to less than $17,000 one year later.
- Interest in cryptocurrency as a payment system and the technology behind it is steadily growing, regardless of Bitcoin’s price.
- Bitcoin has gained mainstream popularity, with people using it for purchases, trading, and investing (both retail and institutional).
- Bitcoin enthusiasts point to developments within its ecosystem as proof that the virtual currency has staying power, while skeptics endorse it as a waste of resources and a scam.
The Case for Bitcoin
The years 2020 through 2022 were particularly tumultuous years for the entire cryptocurrency industry. At the beginning of 2020, Bitcoin traded at about $7,000. By January of 2021, it’s price had risen to more than $40,000—creating lots of interest in it as an asset class. By November, its price rose nearly 71% to a high of $68,789—only to fall again to less than $33,000 in June 2021.
But the Bitcoin price picked up steam in late 2022, and investors are getting back on the bandwagon—its market cap dropped to as low as $305 billion in November 2022 then began a stumbling climb to more then $588 billion by April 2023—although it fell to $503 billion by May.
Many investors and traders find Bitcoin an exciting, but risky, opportunity. For those with a high risk tolerance and money they can afford to lose, it can be a rewarding investment.
Use Cases and Affordability
Bitcoin developments in recent years within its ecosystem have boosted thoughts that the blockchain and virtual currency have staying power. Various technological advancements mean that cryptocurrency could be used in retail transactions in the future.
The number of Lightning Network nodes within Bitcoin’s network has continued to multiply, including cross-chain swaps. Cross chain swaps allow users to trade a token from one blockchain for a token from another blockchain without the hassle of selling the first coin, then buying the next.
The Lightning Network is a second layer blockchain that supports the Bitcoin main blockchain. It is intended to speed up Bitcoin’s network by conducting transactions off-chain.
The Bitcoin ecosystem also continues to grow, including a suite of products that expand its range of use cases. In addition to trading with Bitcoin, you can use it as collateral for loans or to buy jewelry. Many small and mid-size businesses have also begun using Bitcoin to make wire transfers because it reduces middle-man fees.
The Case Against Bitcoin
Bitcoin’s identity crisis is largely to blame for its volatility. It was originally designed as an international currency and as a mechanism for daily transactions that could seamlessly cross national borders—except it didn’t turn out that way.
Over the years, Bitcoin’s use in money laundering and illegal activities has grown, although it isn’t as severe as is often advertised. In 2022, most of the illicit activities using blockchain were theft, avoiding sanctions (43% of illicit activity), and scams. Darknet market use, child abuse material, and terrorism financing made up a tiny fraction of the 0.24% of cryptocurrency transactions that were illicit.
As low as the crypto crime transaction figure is, it is still too high—which is a reflection of the anonymity Bitcoin provides to those with nefarious intentions.
The first challenge relates to the bubbles in Bitcoin’s price. Several Bitcoin bubbles have burst, and it remains to be seen whether the current record-high prices will remain. Previous Bitcoin bubbles occurred in 2018, 2019, and 2021.
During each of these instances, the price followed a parabolic curve: a sharp increase in valuation that was immediately followed by an equally precipitous decline. During each of these bubbles, Bitcoin’s value rose by thousands of dollars and attracted significant retail capital. Thin liquidity volumes played a major part in boosting Bitcoin’s price in these bubbles.
But the biggest change in Bitcoin’s future could come from regulation. The Securities and Exchange Commission has repeatedly denied most requests for Bitcoin exchange-traded funds (ETFs), with only a few instruments making it to exchanges. Bitcoin and other cryptocurrencies remain a prominent topic of discussion at Fintech conferences, in legislative meetings, and among regulators worldwide.
The European Union introduced legislation for a legal framework among its member countries to assist in Bitcoin and crypto-tracking transactions to help prevent illicit activity and introduce consumer protection measures. However, it is likely to be several years before there are any reliable and quantifiable results on the legislation’s effects.
Regulators in Canada tightened stablecoin regulations in February 2023, causing the popular exchange Binance to later withdraw its services for Canadians. Bitcoin’s price waivered slightly after the Binance announcement, but it appeared to rebound the following day.
Other countries are also working on legislation, but it is difficult to say how far they will go to address concerns over protecting the public and preventing illicit uses.
Why Does No One Use Bitcoin?
Many people are using Bitcoin. Crypto analysis firm Chainalysis found that global crypto adoption in 2022 remained higher than in previous years, with most crypto use being on centralized exchanges, followed by decentralized finance exchanges. The firm’s findings on retail use of crypto in countries around the world suggest that in many areas, Bitcoin and crypto are being used for retail purposes rather than investing.
Is Bitcoin a Waste of Resources?
Whether Bitcoin is a waste or not is a subjective argument. One side says too much energy is being used to create currency; another says the energy footprint is less than the current financial networks. Some reports discuss Bitcoin as a savior for those without access to traditional financial services; others argue against that.
Is All Bitcoin Worthless Now?
Bitcoin hasn’t been worthless since it was first introduced—but it is still in its discovery phase. This means that investors, consumers, businesses, scientists, and governments are still exploring its uses and value.
The Bottom Line
Bitcoin has seen its share of defenders and attackers, all raising excellent points. But determining whether Bitcoin is useless depends on what people at the individual level think about it.
It is useless to someone skeptical about storing value, using it as a payment method, or developing solutions on its blockchain. Conversely, it is very useful and valuable to someone who enjoys speculating and betting on price changes. Someone who needs an alternative to traditional financial services might also find Bitcoin very helpful.
What all of this means is that, in the end, it is up to you to decide whether it is useless or not.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author owns 0.21 bitcoins and 1 litecoin.