1. Bitcoin is a bubble.
When bubbles bursts people get hurt. A bubble is when the asset is traded at a value to supersedes the intrinsic value of the assets. It is then followed by a contraction (a falling in the price). Bitcoin matches the definition of a bubble perfectly. The price of Bitcoin is overvalued. The intrinsic value of Bitcoin is very limited because it is not related to any single company or organization to determine the value of Bitcoin. The intrinsic value of Bitcoin at best can be attributed to the technology (programing behind Bitcoin) and the perception people have of its ability to store value. With these things taken into consideration Bitcoin can be argued to have a true value no greater than $2000, and should be trading between the range of $500 and $1000.
There are two famous economic bubbles in history that we can learn from. Tullip mania and the Dot.com crash. If we look at the patterns of both these economic bubbles it is clear that Bitcoin is the same boat. Other than the charts screaming at us that Bitcoin is in a bubble, there are other tell signs. During both the Tullip mania and Dot.com bubbles and more recently the 2008 real estate bubble, everybody was involved in these markets. During the dot.com bubble everyone was buying internet stocks, or starting internet companies. During the real estate bubble, everybody was buying real-estate. Today its Bitcoin, you cannot get away from it, but resist the temptation. No one knows how to time a bubble. You cannot say its going to pop, today or tomorrow, or next year, but when does pop it hurts and people loose a lot of money.
2. Bitcoin will never be valued at $1 000 000 a coin
There is a lot of speculation that Bitcoin can reach the value of $ 1 000 000 a coin, or at least $100 000 a coin. This will never happen. Here is why. Bitcoin is meant to be a decentralized system to make payment transactions without the need of a third party such as a bank. Therefore, how will Bitcoin be a viable currency if one coin has the value greater than a house?
Another reason Bitcoin will not be valued at over $100 000 a coin, is because of its inferior technology to other Altcoins. The value of Bitcoin lies in its programing. Bitcoin is the first digital currency introduced using Blockchain technology. However, being the first is not always best, especially when you don’t have intellectual property protection over your product. Because Bitcoin does not have exclusive rights over Blockchain technology to create digital currency, there are thousands of other cryptocurrencies (categorized as Altcoins) who do the same and even a better job than Bitcoin. There are a lot of Altcoins that have built upon Bitcoin and explored features of Blockchain technology that Bitcoin has not. This means 10, 15 years from now there is a high probability that Bitcoin will not be the leading cryptocurrency.
3.Dealing in the dark
No one knows who created Bitcoin, all we is have a pseudo identity. We don’t know which people or person created Bitcoin. I don’t know about you but I would like to know with who I am dealing with, especially when it comes to my money. To make the inception of Bitcoin even more suspicious it was introduced on the “dark web”, not the most reputable of platforms. There are people who argue that Bitcoin is one big Ponzi scheme, and if not a scheme than at least it is a scam, and that is up for debate. But the mystery behind Bitcoin makes it less easy to trust and valuate. Often when we invest in other assets, such a stocks it is natural to look at the management of the company and take that into consideration before we buy any equity in that company. This is done because we believe the management of the company can influence the performance of that company and our stocks. When it comes to Bitcoin we not even granted that opportunity and that compromises the authenticity of the coin. This is not the case with all cryptocurrencies. Some Altcoins are backed by well established companies and financial institutions.
4.Regulation is going to come in and rain on the parade
Bitcoin still remains a controversial digital currency. There is no consensus on whether it is a currency, an asset, or even a legitimate investment. It proves too soon to tell, and in response to this some states want to ban Bitcoin. In some countries such as China and South Korea ICO’s have been banned, so the idea of Bitcoin being banned is not too far off. But lets’ say hypothetically it cannot be completely banned, it will definitely be regulated. Regulation on Bitcoin will dramatically decrease the value and the fundamental purpose of Bitcoin. The purpose of Bitcoin is to create a decentralized system for payment transactions, however with regulations introduced it will be subjected to centralization by governments. This will effect its intrinsic value and cause the price of a coin to plummet.