In 2008, a new and novel currency came into existence with the straightforward name of Bitcoin. The original purpose of Bitcoin was to get around the need for central banks and send money to people around the world via the internet. Bitcoin’s role was to get around the need to exchange currency when transmitting money from one country to another.
However, there’s a catch: Bitcoin has to be mined using a computer. Once all of the coins are mined, no more will be created.
The idea of limiting the number of coins available for mining was originally intended to help increase the value of each Bitcoin over time. This all went out the window once investors and other actors discovered the ease of transferring money through Bitcoin without being tracked by law enforcement and governments around the world.
Bitcoin started out with a value of zero in 2009 and reached its record high in early May of $68,000 per coin. Investors and miners piled into the cryptocurrency en masse prior to its record high, driving the price up and down on the turn of a dime. One moment, Bitcoin was worth mid-five figures, then worth the low four figures the next. This volatility prompted billionaire investor Warren Buffett to refer to Bitcoin as “rat poison” early on in the rise of the cryptocurrency and has recently stated he wouldn’t pay $25 for all the existing bitcoins in the world.
Buffett’s stance that Bitcoin produces nothing tangible has merit. Indeed, there is nothing of value produced by Bitcoin, and it’s not backed by a business that provides a physical good or vital service. However, Buffett is making investments in cryptocurrency operations, albeit ones that are focused on brokering instead of mining or creating. These services are poised to shape the future of the financial markets even if Bitcoin becomes a myth or a joke.
However, the future of Bitcoin-related merchants is anything but certain, even with Buffet’s investment. CouponBirds has tracked sales generated by Bitcoin-related merchants and found that their sales have dropped off sharply since Q2 2021. There was a spike in sales during Q4 2021, but the trend for sales has been steadily going down. Does this indicate that the reign of Bitcoin as a cryptocurrency and store of financial value is over?
It’s too soon to tell if the air has gone out of Bitcoin and other cryptocurrencies that once flew high. It’s difficult to say if the cryptocurrency is maturing and being treated as another investment vehicle, if the rogue actors that use Bitcoin for less than legal purposes are pulling out, or if people are simply losing faith in its use as a way to transfer money.
There’s no denying the fact that there are fewer Bitcoin transactions as shown by CouponBirds data, but the cryptocurrency retains its 5-figure price even though it’s lost significant value. All markets are entering bear territory and cryptocurrencies are not immune from the same pressures. Only time will tell if investors return to the Bitcoin market and drive the value of the coin back up to its original heights or go further. Then it can be determined if Bitcoin is a myth or a joke.