Will Bitcoin Continue to Sustain Major Drawbacks?

Chris Evans

Bitcoin has been having a roller coaster ride since last year. Its value going from $1,200 in 2013 to around $230 in the present deeply signifies trouble in stability. Everyone is quite well aware that Bitcoin’s price is unstable; that it can plummet significantly anytime soon. However, most people can only speculate. If it is likely to go down and face extinction, it is also likely to go up and prove everybody wrong.

In 2014, Bitcoin was dubbed “the worst investment”. Some agreed and some did not. But the skeptics’ reason for having qualms on the cryptocurrency’s future is justified. Bitcoin and the industries it serves have had serious dilemmas throughout the years it has been active.

In 2011, Tokyo-based Bitcoin exchange Mt. Gox lost $400 million bitcoins in a hacking attack, which followed the company’s demise. Then, early this year, another well-known exchange, Bitstamp, admitted to losing $5 million bitcoins in a similar hacking incident, suspending operations for days.

Security breaches in Bitcoin exchanges say a lot about the overall security of Bitcoin itself. Bitcoin has been branded as a safer way of transmitting funds worldwide than fiat currency, but with cases of hacking attacks, in which huge amount of bitcoins were lost, it can be harder to prove that claim.

Then there’s the Silk Road. It was once the largest online marketplace where illegal drugs were traded and sold through the use of bitcoins. When FBI shut down the website in 2013, it intensified the notion that Bitcoin’s decentralized properties can facilitate criminal activities, discouraging would-be investors.

To sum it all up, Bitcoin’s volatility is pretty much still constant with the value playing around the $210–250 range recently. Two major Bitcoin exchanges were hacked and suffered substantial loss; Bitstamp managed to stay but Mt. Gox did not. Of course, there’s the high-profile trial of Silk Road’s Ross Ulbricht, which is, once again, tainting Bitcoin’s image of a secure and noble means of transacting online.

Bitcoin’s critics will surely focus on these factors alone, of course. However, the supporters can also claim that despite negative circumstances surrounding Bitcoin and its real functions and purpose, it still is a promising technology with remarkably innovative capabilities, if given the chance to stay longer.

Last year, around $300 million was invested in Bitcoin start-ups, in which around 500 companies were launched, much higher than 2013’s 200. Major merchants Dell, Microsoft, and Overstock.com began accepting bitcoins as payment with Time Inc. even accepting the cryptocurrency for magazine subscriptions. Last month, Coinbase also announced the launching of the first licensed US Bitcoin exchange backed by $75 million funding from investment bodies New York Stock Exchange and USAA. The Winklevoss twins are also planning to launch their own regulated US Bitcoin exchange.

    Chris Evans

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