Survival Checklist: 5 Biggest Threats to Bitcoin’s Future
Despite its steady growth in the past decade, Bitcoin remains a work in progress and is facing an uncertain future.
Bitcoin (BTC) has existed for nearly a decade, but a bright future is not guaranteed. After a phenomenal bull run at the end of 2017, BTC prices went in a downward spiral, which cost many enthusiastic buyers dearly.
While the existence of Bitcoin was never guaranteed, it has proved quite resilient. However, using the cryptocurrency as a mainstream means of payment is yet to become a smooth experience. After the protracted bear market in 2018, Bitcoin has a set of difficulties to wrestle with in the coming years.
Miners losing steam:
Since 2013, mining Bitcoin has grown immensely. In part, the enthusiasm was stoked by expectations for a rise in BTC prices and much higher earnings from sales at a future date.
Bitcoin’s hashrate has fallen to a three-week low and continues to drop, going as low as 40 EH/s, or 30% down from its recent peak. This is partly due to the “hash wars,” a period of competitive mining for Bitcoin Cash (BCH), but there may be a wider trend of shutting down mining farms. Adding to the dry season is the situation in China, where hydroelectric power would be scarcer, and the Bitcoin ice age may also include a freeze on mining activity.
Attacks and hacks:
BTC prices remain stagnant but still relatively lucrative, so the incentive to attack, hack, or scam may return to the network. For now, it is extremely difficult to double-spend there, but with miners moving away, the mining power imbalance would be felt more strongly.
Additionally, exchange hacks, exit scams, and loss of funds may shake the reputation of Bitcoin. Since the best selling point of a cryptocurrency is the security aspect, exchange breaches hurt the image of a coin and the sector as a whole. The bear market may cause further capitulation events, and hefty BTC losses are a threat.
KYC and regulatory scrutiny:
Bitcoin is pseudonymous, not anonymous. Tracking whale wallets and fund movements is always possible, and as users become more aware of the limitations, the crypto asset may be overlooked in favor of anonymous coins. At the same time, altcoins are not seen as secure enough.
All-encompassing scrutiny of Bitcoin’s network is good for discouraging bad actors from using it. However, it could also lead to an attempt to dump the coins and escape scrutiny. The more Bitcoin faces financial regulation, the less valuable it becomes.
Cryptocurrency fights and wars:
The debates around SegWit2x did not break Bitcoin. However, the Bitcoin Cash hash wars triggered one of the steepest price drops this year and undermined the sector once again, causing a new wave of capitulation from traders or retail investors.
Bitcoin’s protocol is taking a conservative road, but there are still many weaknesses to be addressed. The network has survived numerous forks, but the fights and wars are creating confusion for newcomers and facilitating potential scams and losses.
A global recession:
There are factors beyond the crypto community which may affect Bitcoin usage or investment. The prices and investment opportunities were spurred by a decade of robust economic growth and high liquidity. Hot money went everywhere – into the housing market, tech, stocks, and also cryptocurrency - but the period of easy investment may be over.
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With no upside to Bitcoin prices and little excess cash to go around, the cryptocurrency market, projects, and the entire ecosystem may dry up and cast doubt on Bitcoin as a new and viable asset class.
Bitcoin and several other projects may survive these factors and even come out stronger, but the challenges may put pressure on cryptocurrencies in the coming years and slow down mass adoption.