The Comenian

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Please, Stop Buying Bitcoin

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Have you ever been sitting around and found yourself wondering, “Gosh, I just wish I had a quick and easy way to get rid of all this pesky money?” Well if you have, maybe you should try buying some Cryptocurrencies like Bitcoin, Ethereum, or Litecoin.

Bitcoin made headlines last year when its price peaked at around $19,000 at the beginning of December, and even though it’s lost more than $200 billion in market value since the beginning of 2018, it’s still a popular investment. It’s become particularly popular with young people, as the majority of crypto buyers falls between the age of 18-34 and more than 17% claim to own some. In fact, a recent survey by The Student Loan Report actually found that one-fifth of college participants polled admitted to using their student loans to fund a cryptocurrency investment.

It might sound like a hip new and convenient way to “get rich quick,” as a friend of mine posited to me last week, but I can assure you that Bitcoin (all cryptocurrencies really) are a completely useless innovation. The only real reason for their popularity is their ability to circumvent government oversight, which happens to be extremely convenient if you’re buying off the black market. This is why profits made from its speculation aren’t taxed, but other than that, it has absolutely no social function. In fact, it isn’t even really much of a currency either.

Many firms like the banking company Stripe have slowly started rejecting Bitcoin as a method of payment because, “Transaction confirmation times have risen substantially…[which] has led to an increase in the failure rate of transactions.” Essentially, by the time the transaction is approved, Bitcoin’s market price has already changed, meaning it’s been transacted at the wrong value. This is why financial assets don’t make very good currencies:  their value frequently changes at an unpredictable rate, which is why you shouldn’t pay for things with shares of stock. Instead, good-old predictable dollars that only change in value at the rate of inflation are a much more reliable medium of exchange.

Cryptocurrencies like Bitcoin also face another frequently overlooked problem: energy consumption. Cryptos use a high-tech accounting ledger known as The Blockchain. The technology records Bitcoin transactions using a series of cryptographically stored and connected “blocks” that can verify “proof-of-work” for Bitcoin mining. But the system requires an incredible amount of raw energy to secure these transaction and has actually consumed more energy than several countries because of Blockchain’s inefficiencies. This means every Bitcoin transaction has an immensely high carbon footprint which makes it an extremely unsustainable practice to continue.

Overall, the Bitcoin phenomenon is nothing new. Its price trajectory very much resembles Dutch tulip bulbs in the 1630s, real estate during the early 2000s, and the stock market during the 1990s, all of which are called asset bubbles. People who invest in these bubbles early on stand to make a lot of money, which then attracts new investors and their profits pull in even more investors until the bubble eventually breaks from overvaluation. This cycle creates something of a “naturally occuring ponzi scheme,” as a recent report by the World Bank put it.

So the realm of unregulated retail finance that Bitcoin belongs to is definitely not worth investing in for college students or for the average American.

Cryptocurrencies like Bitcoin are such a useless and dead end technology that even if their market price makes slight rebounds in the coming months ultimately the mania will fizzle out.

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