How the (supposedly) mighty have fallen. A couple years ago, it looked like bitcoin could become a major new global currency. But finance experts are now saying bitcoin's end is right around the corner.
"With the price of bitcoin BTCUSD, -3.93% having fallen almost 80% from its peak, and now trading well-below the support level of $6,000, everyone is wondering where it goes from here," wrote Atuyla Sarin, a finance professor at Santa Clara University in California, in a recent column that's been going around. "The answer is, a swift and painful drop to zero."
I've never been a fan of the imaginary currency because it takes a ridiculous amount of energy to mine bitcoins. In 2017, bitcoin mining took up more energy than 159 countries. 12 states in the U.S. use less energy than bitcoin.No central government makes bitcoins. Instead, bitcoin mining involves using graphics cards to solve math equations, which takes a ton of electricity. Bitcoin users liked to imagine that lack of centralization made their currency fairer somehow, but in reality, the bitcoin mining process was totally inaccessible to most people, with the wealthy buying incredibly expensive computer hardware to mine way more coins than any regular person could.
"As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral," continued Sarin. "That is, without the mining activities supporting the ledger that maintains the records of who owns what — bitcoin is, after all, a set of encrypted numbers that cannot establish the ownership of anything — bitcoin will become worthless."
We've known bitcoin was dropping for a while, but the nails are really going in the coffin now. It costs $5,000 to make a bitcoin. But bitcoin is now only selling for $6,000. If this pattern keeps up, it'll soon cost more to make bitcoin than bitcoins are actually worth, meaning nobody will bother making them anymore.
"Unlike gold, which, probably due to a historical accident, is universally accepted as a store of value, bitcoin is a digital commodity with no such universal acceptance as a store of value," Sarin went on. "While the original buyers and miners of bitcoin were true believers in the paradigm shift they thought it promised, and were willing to make the necessary investments for future gains, the more recent buyers and miners have been run-of-the-mill, greed-driven investors."
Bitcoin is a colossal waste of energy that will soon be no more. Good riddance.