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The 1 thing that can make Bitcoin fail, and why it probably won’t…
After some research into Cryptocurrencies in general, I would like to compare the crypto market with an industry that I understand. The wildlife industry in South Africa.
I think we would all agree that wild animals should be able to thrive in a natural ecosystem where nature is able to take its course. Where the lion is still the king of the jungle and survival of the fittest is at the order of the day.
But, with so many aspects in life, the natural order of things were challenged a few years ago by humans who felt that exotic species were more beautiful than their natural counterparts. This created a new industry whereby these exotic species were bred and sold at auctions at astronomical amounts.
Numerous people speculated that it may be a bubble and within a few years, the prices of these exotic animals reduced to as little as 10% of the prices that they were sold at during the heydays.
Why did this happen? Why did this “bubble” burst?
The main reason was the lack of an end-market for the exotic species. Tourists weren’t eager to pay inflated entrance fees to private game reserves to see exotic species and hunters preferred to hunt “trophy” versions of the natural species as opposed to paying highly inflated amounts for the exotic species. To make a long story short – There was no end market for exotic wildlife.
So, how does this relate to Bitcoin and all the other cryptocurrencies?
The main difference is that there is a significant end market for cryptocurrencies. I am not going to go into detail with this, but let’s just say that this end market exists for the sole reason that cryptocurrencies are relatively unregulated for all practical purposes.
As soon as the industry becomes regulated, expect a significant portion of the end market for these currencies to vanish overnight. As soon as the industry becomes regulated, the only use will be a reduction in “friction costs”, such as various admin fees.
So, as long as cryptocurrencies remain less regulated than fiat currencies, we can expect the craze to spread and grow. With the only enemy of this new industry being the long arm of the law and the regulators.
I am looking forward to see how this will unfold, as I strongly believe that a measure of regulation is essential for an industry of such growth and increasing significance.