Well first of all, I am an cypto-enthusiast, but I HODL (as you guys like to say) 0 BTC. There could be many difficulties if Bitcoin would be more thoroughly adopted, today I decided to share a few with you guys. In figure number 1, Blockchain.info is providing data of number of transactions per day, where it is visible that Bitcoin is currently reaching around 400 000 transactions per day, which is around 4,6 transactions per second (tps). Comparing this with the leading provider of global payment solutions, (i.e. Visa), there is an average of 1667 tps and PayPal, one of the world's largest Internet payment companies, average 193 tps, which ultimately leads to believe that Bitcoin is currently representing a small amount of daily transactions. (Vermeulen, 2017)
Figure 1: Confirmed Transactions Per Day in Bitcoin (Blockchain.info, 2017)
Figure number 2 represents mempool size – the aggregate size of transactions waiting to be confirmed. At the moment, there are around 120 000 000 transactions waiting to be confirmed, which brings up the first big issue when it comes to Bitcoin – Scalability. The maximum number of transactions per second is around 7 tps, which is way too slow to become mass adopted currency and has already problems that shows in increase of transaction costs. The physical constraints imposed on bitcoin by it’s source code ultimately reduces the currency’s liquidity, something that famus macroeconomist Mankiw (2010) argues to be one of the key components that needs to be fulfilled in a currency.
Based on that information, we could say that even if Bitcoin is becoming more and more popular it can’t replace fiat currencies at the moment, as a result of scaling problem. Bitcoin scaling problem could be solved with hard fork - a change to the bitcoin protocol (Bitcoin.org; 2017). To develop protocol that could put Bitcoin in competition with Visa or PayPal would probably take years and seems like fixing a driving car. To reinforce the thesis about Bitcoin’s speculative value, comparison between market capitalization and average number of transactions ratio has been made, as we propose that number of transactions is representing currencies relevance as medium of exchange - one of the key features of money. According to Yahoo Finance, Bitcoin’s market capitalization at its peak was around 335 billion dollars and PayPal’s holds around 90 billion. Bitcoin became far bigger in terms of market capitalization comparing to leading online payment provider - PayPal, but as discussed before handles only less than 9 percent of PayPal’s average transactions. The value is clearly speculative and it's one of the reasons why Bitcoin will not be successful.
But even if we consider Bitcoin just as a store of value, not as a currency, the failure is still ahead. I have plenty of reasons that support my theory, but I am not saying that you should avoid crypto. If this post reaches $20 I will take time to explain the other factors, that will definetely stop you from FOMO, and tell you how to prepare for BTC crash.