Bitcoin will not die for one very good reason

Rumours of the death of Bitcoin may have been exaggerated, but the cryptocurrency is undoubtedly in a sickly condition.

Bit of trouble

At time of writing it trades at $3,591, a fraction of its all-time high of nearly $20,000 in December 2018, as the latest rally fades. There are plenty of reasons for this. The rot started when investors were given the opportunity to short-sell the overhyped alt-coin, which many have done with gusto.

The financial authorities feared and despised cryptos and did their best to scupper the sector with constant regulatory threats. Some blame the ‘whales’, early adopters who held billions of dollars worth of coins, for manipulating the market (although personally, I never saw why they would want to manipulate it down). Regular massive thefts from crypto exchanges have also undermined confidence. This is like the wild west, with no Wyatt Earp.

Practically useless

I think the biggest single problem is that we have still to find a serious practical use for it. Why should I use crypto currencies to make international money transfers when I have MasterCard and Visa in my wallet for purchases, international currency transfers are getting faster and more competitively priced as new Fintech operators emerge, and digital banks such as Revolut give you spot rate currency switches.

By comparison, Bitcoin is slow and cumbersome, while the currency’s huge volatility makes it pretty useless for payments as you never know how much it is going to cost you.

However… While I wouldn’t be surprised to see the value of my (sadly tiny) crypto holdings dwindle even further, I do not expect them to disappear altogether because that is actually one use for Bitcoin. And no, I’m not talking about terror finance, kidnapping plots, drugs profits or money-laundering, although Bitcoin is still used for this (as is the US dollar and every other paper currency).

Trouble in store

Bitcoin still has a use as a store of value for people in deeply troubled countries such as Venezuela and Zimbabwe, and other countries going through financial difficulties, for example Argentina and Turkey (and maybe even the UK if it doesn’t sort Brexit soon!)

This is only a semi-respectable use, but then again, this is only a semi-respectable currency (and that may be overstating it). However, when people are desperate, it does offer them one way of keeping the money moving. Crypto trading in Venezuela has touched record highs where it has given desperate families a store of value, and the means to buy basic goods such as soap and shampoo.

Bank on shares

You may not be too excited by this. Nor am I. Neither can I see cryptos recovering their once high-flying status. I am only holding on to my remaining coins out of curiosity, sentimentality, and our old friend, fear of missing out. Like Rupert Hargreaves, I also have room in my portfolio for a bit of speculation.

Once again, stocks and shares have seen off the latest passing fad. Despite the current bear market, I don’t see that changing in my lifetime.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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