The slow growth of Bitcoin and value declines seem anomalous to many people. If Bitcoin is so great, shouldn't it be expanding faster, like the internet?
To understand this we can take a close look at the Bitcoin Rationale, the value proposition. You will find many people who say it has no rationale, other than that of a Ponzi scheme or tulip mania, but this is patently incorrect. Bitcoin offers 3 major values:
Value S: The ability to securely STORE money without the help of a 3rd party (such as a bank) and without physical plant (safes/warehouses)
Value T: The ability to TRANSFER money quickly anywhere in the world (once again needing no 3rd party or intermediary)
Value A: The ability to pay money relatively ANONYMOUSLY
Let's compare and quantify Value T:
Credit/Debit Card (recipient must be a authorized merchant): less than 30 seconds with limit dependent on card
Western Union: typically 24 hours and $3,000 limit
Fedwire (US only, both parties must have a bank account): 24 hours
SWIFT (both parties must have a bank account): 3-5 days
Bitcoin: 10 minutes
This advantage looks huge and would appear to be dominating. The drawback? Cost of currency conversion. Typical brokers charge up to 5%. If you pay that coming and going, it's a 10% surcharge on your transfer. So, if you are transferring $50,000 you could easily pay $5,000 for the transaction. Compare that to a bank transfer which has a fee of $50. If your transaction is denominated in Bitcoin, then the transfer is free, but if the transaction is in dollars or some other currency, you could pay quite a lot. Since most businesses use national currencies, this cost is often a deal breaker. Its a chicken and egg problem. If everybody did business in BTC, then money transfer would be free (or at most a small transaction fee), but so long as it is a fringe currency, the conversion costs are high.
This liquidity problem holds back growth, but eventually I expect there to be a snowball effect as adoption grows and more and more people keep wealth permanently in BTC.
The internet infrastructure was in place in the Reagan administration (1980-1984), but it did not really start growing until the world wide web was underway around 1990. Even so, it took another 10 years after that before it became a household commonality. If we consider that Bitcoin software has been available for only 6 years, this comparison suggests significant continued growth and adoption is possible.
Its often believed the enduse steers the unfolding path. Selling a BTC at USD 1000 (or 300) was definitely not a rationale. Fraudsters/tricksters taking advantage of near-anonymity and lack of regulation features of BTC to devise scam upon scam are probably driving the enduse spectrum of BTC today. Since it is fully decentralized (so no cops) it is going to be near impossible to prevent/punish such enduse. So how do we steer it back to mostly positive enduses?
