Bitcoin has been on a downhill trajectory for the year and the bloodbath looks unlikely to stop. The currency is down over 80 percent from its record high and has been oscillating between $3,000 and $3,500. The other cryptocurrencies haven’t fared any better, with Ethereum unable to stay above $90. While many analysts have promised us that a massive bull run is on the horizon, they have misled us to think that HODLing is the best move to stop the plummet in prices. It’s not, spending is – here’s why.
We Had the Answer All Along
Cryptocurrencies, Bitcoin especially, have been compared to gold. Gold is one of the most widely accepted stores of value globally. Bitcoin’s volatility has been cited as the reason it can’t replace gold as a store of value. Although the crypto community has consistently made efforts to turn the virtual currency into the gold of the internet, the challenges have been immense. It seems we may be asking for too much from a very nascent asset. We need to give it time to follow the same path gold took.
Before gold became the precious metal it is today, it was first used as money. This was the first step in giving it value. In 600 B.C, the kingdom of Lydia in modern-day Turkey became the first people to declare gold as currency. In the centuries that followed, gold became widely accepted as currency, being used and accepted globally.
Bitcoin is only a decade old, and the fact that it’s being compared to gold is already an achievement by itself. However, it needs to first become widely used as currency before it can become a store of value.
The Fundamental Challenge for Bitcoin
As Bitcoin asserted itself in the financial world, many merchants began accepting it as a method of payment. From global giants such as Microsoft, Overstock, Christie’s, and Expedia, to the neighborhood coffee and pizza joints, paying in Bitcoin was taking root. Then came the price crash, and all the progress was wiped out.
According to a survey Chainalysis released recently, Bitcoin payments handled by major payment processors are down by over 80 percent this year. The survey involved over a dozen Bitcoin payment processors including BitPay, which dominates the field. All revealed that crypto payments are now a rarity. Some of the merchants who supported cryptos have ceased to accept them, such as travel giant Expedia.
Is There Light at the End of the Tunnel?
Lack of real-world use remains the biggest challenge for Bitcoin. Sadly, this is a challenge that the community has ignored for a long time. Instead, the attention has been accorded to the Bitcoin skeptics such as Nouriel Roubini, the SEC, which has cracked down on fraudulent ICOs, the supremacy battle between Roger Ver and Craig Wright, and other such issues. Granted, these issues have a bearing on the market and affect the prices. However, these pale in comparison to the damage that the lack of real-world use of Bitcoin has.
Five years ago, it was criminals who controlled the majority of the Bitcoin daily transaction volume. According to one DEA agent, criminal activities accounted for as much as 90 percent of the volume. This has changed significantly as Bitcoin went more mainstream, and currently, crime only accounts for 10 percent of the volume. However, it’s the HODLers who have taken over. This group of people looks at Bitcoin as a way to make millions of dollars. They are committed to HODLing for as long as necessary to achieve this.
HODLing is not what Nakamoto envisioned ten years ago. Bitcoin’s purpose was, and still is, to replace the state-backed and monopolized fiat currencies. It seeks to give people power over the currency they use. It’s only by spending Bitcoin that we give it intrinsic value. As time progresses, this will push the currency back to one of its primary use cases.
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