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Is Bitcoin Facing an Existential Threat?

Aftet losing up to 85% of its value from its all time highs, Bitcoin is facing extinction. Its price has tumbled in steps like a ball rolling down a stair. In the last 17 days the crypto marketcap has lost $81 billion. And rumors of investors and miners capitulation abound. In a statement to Financial Times, Mike Novogratz, CEO of Galaxy Digital Holdings Ltd, implied an existential threat to Bitcoin. His remarks are in reference to heavy investment losses incurred by his company in the current Bear market. And analysts now predict a further drop of Bitcoin’s price to $3,000 is imminet. All of this certainly points to a steady crypto demise.

Miners

Mining supports the entire crypto infrastructure; from coin production, hashrate capacity, to providing consensus. Production costs are rising due to increased competition and industrial scale mining. Unlike other markets where both factors cause a price drop, crypto costs increase due to mining difficulty. In order to remain competitive, mining companies must spend on more powerful and relatively expensive mining hardware. This makes mining crypto expensive and decreases profits.

However, even though the price drop causes a number of miners and related businesses to fail, this also consolidates production. Less competition decreases the difficulty level and make the remaining miners profitable. Another point of contention arguing a Bitcoin collapse is the two month drop in hashrate by 21%. But this is also consistent with a mining price consolidation phase. Less miners equal less computational power.

ICOs

Enforcement, lack of activity and purpose has caused an extreme drop in the price of ICOs.  Of the 2,071 crypto currencies in existence, only 50 have a daily trading volume of one million dollars or  more. Some have lost up to 90% of their price value and others have broken up, shutdown, or otherwise gone out of business. All the while incurring unsustainable losses on the market.

Investors

There is exodus of invesors happening; from early adopters to recent additions, more investors are exiting the market. No investors mean no money; no money, no crypto market. The loss of investors faith in ICOs whose positions were decimated is a major force driving the market down.

Adoption

Crypto monitoring company Chainalisys reported that Bitcoin retail use declined by 80% in September. The lack of both, scalability and stability, is hurting growth and mainstream adoption. Promising improvements are yet to materialize, and Bitcoin only use remains an alleged store of value. Without adoption, Bitcoin has no real use and in time it will lose its luster and fade into oblivion.

Analysis

Bitcoin is under attack from all fronts. The mounting pressure is ever driving prices down and it’s beginning to lose value in the eye of investors and users.  Luckily, being bullied out of existence is the natural state of the digital asset. However critical the current situation may seem, all is not lost; not yet.

Reports of investment and development growth in the crypto industry downplay the severity of the situation. Long term hedge funds and exchanges are holding steady and are resolved to weather the storm. Current oversold conditions create the perfect opportunity for a pullback and innovation will eventually catch up with scalability. In the end, there is enough cause to believe that a complete dismissal of Bitcoin may be premature. And Bitcoin may be experiencing more of an existential crisis than a threat. And in time the market will soar once again.

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