So I alluded in a previous post about the shortcomings of Bitcoins and my concerns over the viability of it as a universal currency. Funny how quickly things can progress, but in recent days, Bitcoins and subsequently Altcoins have taken quite the beating.
So Altcoins in theory were supposed to either supplement or be independent of Bitcoins altogether. Some where even claimed by some to be the next generation of Bitcoins. I dont want to spend too much time on Altcoins, but I think it’s clear that in the end, all roads lead to Rome; that is, everything ties in with Bitcoin. The reasoning is simple, if there aren’t many people using Bitcoins as a currency, there are even less people who use Altcoins. Owners and miners of Altcoins are essentially a subset of the people who use, have used, or will use Bitcoins, and a very small subset of those to note. For simplicity sake I will refer to Litecoin when talking about Atlcoins since that seems to be the major Altcoin at this time. Though previously there have been some fluctuations between BTC and LTC over the last several weeks and months the exchange rate between BTC and LTC have been relatively stable with a slight decline in BTC/LTC ratio, that is LTC is losing value compared to BTC. None of the other Altcoins have even seemed to gain any traction so the best bet of a surviving Atlcoin if BTC is no more would be LTC which seems to be just an extension of BTC itself. So really, if BTC falls, so does LTC and all the other Altcoins.
Now that we can ignore Altcoins for the sake of this discussion, BTC has taken a huge hit recently. Apple announced last week (well not so much announced as just acted) the removal of the last remaining BTC e-wallet from its iTunes store. Some 43% of all smartphone users use iOS. This means that now, some 43% of smartphone users can no longer use Bitcoins from their iPhone e-wallet app. Sure there are ways around it such as using the browser to acces an online e-wallet, but this move drives a wedge between major tech companies like Apple and Bitcoins. As much as people may deny it, the capitalistic world we live in today is dictated by the big companies who have the power and resources to lobby and levy their own agendas. If you meet enough resistance from these entities, you can be damn sure you will have to go through hell and high water to even have the slightest sliver of hope.
Shortly after, Russia issued a statement outlawing the use of Bitcoins entirely, claiming that Bitcoins were being used by terrorist groups to fund terrorist operations that could include any on the Socchi Olympic Games. This is an even harsher view than China had made months ago when it banned financial institutions from engaging in Bitcoin activity due to the extreme volatility.
And the bad news for Bitcoin didnt stop there. MtGox, one of the top 2 exchanges in the world for BTC by volume announced that it was halting all withdrawals due to an error in its system, effectively freezing the BTC assets of all its users. Not surprisingly, the price plummeted.
And it keeps coming. A report earlier this week exposed a fundamental flaw in the transactions of Bitcoins where the identity of a sender/receiver could be altered while the transaction is being verified. This would cause a double spending of a Bitcoin. Something that is supposed to be impossible to occur. Moreover, this confirms my statement previously that the sender and receiver’s identities could be accessed through the block chain.
And if it weren’t enough, a DoS attack forced a second major exchange to shut down.
The current result? What was once trading around USD$900 just several days ago is now struggling to maintain a value over USD$500.
You can say and try to reason that this is just a dip and that the value will rebound, pointing to previous crashes and rebounds, but this time around the opposition and resistance is just far too great and too open. The user base of BTC is resilient and very vocal so BTC will probably still be around for a little while, but this marks the beginning of the end for Bitcoin and Altcoins.