Is Bitcoin a scam or not?

Written By CoinGawk

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At the end of 2017, I told myself winter will be coming. We were witnessing one of the biggest bubbles in human history and it diminished in just a couple of weeks. The cold hard facts were real: we reached 20k US dollars in December 2017 and a year later it was merely at 3k. In July 2019 we reached a price of 14.000 USD which is already plummeted a couple of months later. A good summary would be a rollercoaster of emotions for crypto investors. Today I’m going to debunk the most used counterarguments of investing in Bitcoin.

Bitcoin is a bubble?

As an ex-finance student, I have some relevant background in studying markets. I have learned a lot during this period at college. I have learned for example what a bubble is: a quick rise of an asset-based on an irrational market. But this is just basic info of labeling events in a financial market. The real way to learn how markets work is by observing the market and recognizing the phenomenon within it. Learning the patterns of other asset markets by watching their history.

The fascinating part of bubbles is that they come and go. One can start today and get destroyed a few months or years later. But bubbles exist for a reason, just like everything else in life it has a purpose. It’s an opportunity for people to make money. This is the main reason why I believe there will be another bubble (like how Bitcoin had 4 previous bubbles before). Every single time Bitcoin crashes after a bubble, the skeptics come out of their basement to emphasize this event.

Although they are right about the bubble phenomenon, they are not pointing out that it is a market correction. That’s a very important detail because this implies that the growth will keep continuing in the long term. Which Bitcoin already has proven so far. See the image below for a bitcoin price chart over the last decade.
Price of bitcoin from 2010 till now

bitcoin 5 year price

A repetitive bubble (more than 1 bubbles) cannot exist in a Ponzi or pyramid market: these markets exist to trap people for once and to leave forever. Mostly, this argument is often used by little retail investors (the average Joe) that got in during the peak of a bubble. This is understandable as the market is unregulated and a huge crash like in 2018 is possible this way. Due to the unregulated nature of the market, the crashes are huge (which doesn’t make it a scam) but if you look at the larger perspective, it’s simply a market correction. The fact that Bitcoin hasn’t plummeted to zero yet confirms this thought.

Bitcoin is a Ponzi!

This has to be one of the most used arguments against Bitcoin. It amazes me to see the number of people repeating this argument in every discussion including Bitcoin. It’s ironic as Bitcoin is actually tackling the Ponzi problem by trusting maths instead of human beings (who are the ones that actually create Ponzi’s in general). Bitcoin is a decentralized network, there is no central point that can control all the activities on the network itself. It needs consensus from different parties to active an activity (for example a transfer from wallet A to wallet B). Alongside the fact that a lot of reputable shops are accepting Bitcoin as a payment option for several years without issues, it simply destroys the Ponzi argument.

Bitcoin is not a payment solution

Yes and no. It is a revolutionary way of storing value without anybody having access to it. Gold is physical and can be stolen, a big amount of money is usually stored in a bank (which means the bank has your money, not you). These assets (alongside other assets like property) can be confiscated by other parties (taxman, government, banks or people in general) while Bitcoin gives you the opportunity to be your own bank. Unless you give away your private key or seed, nobody will be able to move your funds.

Is it a payment solution right now? Not yet. It is true that Bitcoin is hard to be used as a payment solution for regular stuff like a coffee. On average, the bitcoin transactions per second is just 7 while VISA processes more than 65.000 transactions per second. This is the price that Bitcoin pays for decentralization, but it serves another purpose which is a store of value. This is a scenario a lot of people don’t care about it until a financial crisis could happen. In 2012, the people in Greece could only withdraw 50 euro a day even though it’s their own money. This is a terrible thing if you have needs to be paid. People in Venezuela are adopting Bitcoin because they have no choice: their own currency is massively inflating due to the economy.

But, Bitcoin is used by criminals

Also, a very popular one, mainly used by banks. Obviously, banks have an interest in spreading negative news on Bitcoin as the protocol is invented to throw down the power of the centralization of money. Yes, it is used by criminals. It became an alternative, an option of payment but not their main option of payment. The main option for payment used by criminals is still the green papers: when you receive it, you don’t know the history of this little green paper. Yet, with Bitcoin (as it is an open ledger), you can see the history of the bitcoin that you have received. So essentially, paper money is more anonymous than Bitcoin. The open ledger feature of the Bitcoin protocol makes sure that it is not the best method to exchange value in an anonymous way.

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