What is Holding Bitcoin Back?

Media frenzy is not always good news for Bitcoin

by Kyzmoff
09 May • 3 min
In Analysis

With some investors still searching for an understandable explanation of Bitcoin (BTC), others looking for the real application of blockchain technologies, it seems that it is hard to grasp the idea of what cryptocurrencies exactly are and what they should do. The problem is that people often ignore a crucial difference between Money (what) and Payment Technology (how). The confusion comes from the older means of exchange - gold or salt for example. There is no difference between what money is and how it is transferred because, say, the gold would simply be handed over. Today, however, the use of physical cash is dwindling as many of our purchases are over the Internet. And that is where Bitcoin came in to disrupt the financial status quo.

So why the average Joe cannot buy coffee, or shoes, or his dinner with Bitcoin? There are regulatory and technical concerns which deter small business from becoming first adopters. However, the real problem is volatility. A small company needs to pay rent, buy supplies, sell products and services, and pay its employees on a regular schedule. Implementing Bitcoin, for these companies, is a bit like accepting lottery tickets as money. The unusual volatility in cryptocurrencies makes it impossible to predict whether or not a company’s balance sheet will be in the red on a pay date.

It is true that there are numerous projects for stable-coins but none of them has evolved enough. But the advantage of cryptocurrencies is not that they are electronic currencies; dollars, euros, yen, and yuan are all digital currencies today. In advanced economies, most consumers have a bank account with debit and credit cards, which means that they are already possessing e-wallets and dealing with digital money. The advantage of the blockchain technology is that it offers a self-sustained alternative to the traditional payment transfer system. It is as if all bitcoin users are banking with the same decentralized bank. With all transactions kept on a blockchain, there are enormous savings on administrative costs and transaction time. But stability in prices is vital and volatility does not seem to be calming down.

Bitcoin-analysis-slavcho-trend

Although cryptocurrencies are all over the media right now the hype does not seem to be thriving. Exactly, the opposite, the interest in the topic appears to be dying out. In the above graph there seems to have an interesting correlation between web searches and peaks in the price of Bitcoin at the beginning of 2018. But BTC's latest surge to $10,000 USD does not seem to correlate this time.

 Bitcoin-price-chart-analysis-slavcho

 

The fact that Bitcoin is trading below its 200 day average for the first time since 2015 is not positive either. As seen on Bitcoin's price chart, the upward move could not break above the 200 day average line which is around USD 10 000. That, in addition to the declining hype and stalling mass adoption seem to be a setback for the coin. BTC's last support on the 50 daily average is near USD 8000. If that level does not hold, we might better buckle up. A possible fall in the price could always be a buying opportunity. So do not let the FOMO (fear of missing out) kick in and patiently wait for the opportunity to reveal itself.

(The views and opinions expressed by our contributor(s) in this article should not be considered financial advice, neither treated as expression of Coins.Online’s view. Cryptocurrency trading and investing is risky and market participants are advised to always conduct a thorough research.)