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9 Drawbacks of Bitcoin That Investors Often Overlook

9 Drawbacks of Bitcoin That Investors Often Overlook

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by Max Nevskyi

2 years ago


In this article, we will discuss some of the main problems associated with Bitcoin that are often ignored by its supporters. It is important to have a more comprehensive and objective understanding of the cryptocurrency and its potential.

Contents:

What's wrong with Bitcoin

"Cryptocurrency Bubble" that needs to be addressed

Most participants in the crypto community are in an information "bubble" of security. This bubble is formed due to the crypto enthusiasts' environment, which tends to overlook the flaws and problems associated with cryptocurrencies, preferring to maintain an idealized view of them. Another problem is social media and their news feed algorithms. Platforms like Twitter, for example, provide crypto analysts with information that aligns with their interests, suppressing diversity and critical perspectives. As a result, members of the crypto community often miss out on sound criticism that contains valuable observations and truthful information.

As a result, an information "bubble" emerges. This bubble prevents its "participants" from objectively assessing the situation and making informed decisions. It is similar to the former crypto millionaire in the popular meme who is unable to fully understand how people live outside the crypto industry.

At the same time, while cryptocurrency investors await the next bull market, critics of the crypto industry continue to compile their lists of failures. One such "hall of shame" is the initiative of Molly White, who acts as a skeptic of cryptocurrencies. In her Twitter account titled "web3 is going just great," she maintains a feed of failures that have befallen the crypto industry. Subscribing to her account will help quickly dispel the rose-tinted glasses of optimism.

Another way to break out of the "bubble" is to follow the most active critics of cryptocurrency.

What are the criticisms of Bitcoin?

Outside of the cryptocurrency community, where people benefit from investments and enjoy luxury, there are significant negative opinions about cryptocurrency. Let's explore the main criticisms raised against Bitcoin to better understand the reasons behind the criticism of this new financial instrument:

1. High level of speculation

The emergence of Bitcoin occurred during the global financial crisis of 2008. Instead of becoming a full-fledged alternative to traditional currencies, Bitcoin's high volatility turned it into a speculative asset on which traders make money.

Bitcoin speculation

2. Low transaction throughput

The transaction throughput of the Bitcoin network is limited to approximately 7 transactions per second, which is insufficient to meet the needs of all participants in the financial market.

3. Inefficiency

Satoshi Nakamoto envisioned Bitcoin as an independent payment system with limited cryptocurrency issuance. Due to its deflationary nature, BTC has become an attractive means of preserving savings. Currently, many prefer not to spend bitcoins because the history of their price dynamics shows that their value can significantly increase over the course of a year.

4. High level of centralization

Claims of Bitcoin's complete decentralization do not correspond to reality.

Firstly More than 30% of all bitcoins are held by large investors known as "whales." Having a significant amount of cryptocurrency, these investors have the potential to manipulate the market if they desire. Secondly Bitcoin mining is also not fully decentralized at present. Currently, based on the latest data, more than 50% of the total hash rate is controlled by just two mining pools: Foundry USD and AntPool.

It is important to note that if malicious actors obtain more than half of the computational power of the entire Bitcoin network, it could allow them to gain control over BTC.

5. Correlation with the stock market

The stock market and Bitcoin demonstrate a high degree of correlation, meaning they are interconnected. Observations suggest that problems arising in the financial market that negatively affect stock indexes also have a negative impact on Bitcoin. Conversely, the growth of the stock market usually has a positive influence on Bitcoin.

6. High level of fraud

Cryptocurrency provides an opportunity to maintain confidentiality, which has attracted the attention of various dishonest individuals. As a result, this new financial instrument has become a favorite means for various fraudsters.

7. Negative impact on the environment

The mechanism of Bitcoin mining, known as Proof-of-Work (PoW), requires significant energy consumption. Environmentalists express concerns about the negative impact of Bitcoin mining on the environment.

For this reason, from time to time, there are news about various initiatives aimed at banning the use of the PoW algorithm for cryptocurrency mining. However, there are opinions according to which the fight against Bitcoin mining is merely a pretext for suppressing Bitcoin itself.

8. There are stronger projects in the market

Critics raise objections to Bitcoin, pointing out that with the emergence of BTC, more advanced projects have appeared that perform alternative functions to traditional money more efficiently.

Cryptocurrency Bubble

9. Creator's anonymity

The identity behind the pseudonym Satoshi Nakamoto remains unknown. Furthermore, we are unaware of the true intentions of Bitcoin's creator. It is possible that Satoshi Nakamoto deliberately chose anonymity to have the ability to unexpectedly influence crypto investors in the future.

Conclusion

It is important to remember that despite all these issues, Bitcoin still has significant potential, and many of its supporters believe that its advantages outweigh the disadvantages. However, for a complete understanding and assessment of this cryptocurrency, it is important to consider all aspects, including critical opinions and problems.

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