Simply put, Bitcoin is a virtual currency. Through Bitcoin, users are able to transfer Bitcoins anonymously by the use of a main ledger called the Blockchain. With the use of this system, users are able to move Bitcoin from one user to another and remain anonymous.

Bitcoin is a bubble ready to explode and here’s why:

At first, you must realize that Bitcoin has no physical entity and it has market value just because people believe it has value. This is a key reason why many have called the currency a bubble waiting to pop. At its core, the Bitcoin is just a cryptographic protocol designed for people to believe they have something valuable. Bitcoin boasts an ironic blend of anonymity and transparency. People can track a Bitcoin from its inception, but there is no way to verify the origins of the Bitcoin itself.

Much of the Bitcoin’s success can be attributed to its volatility – so much that it has been deemed as an impractical currency. However, people are getting into Bitcoin not because of the ability to transfer money, but to hoard Bitcoin under the pretense that it would be worth more. After you purchase your Bitcoin, there’s nothing much that you can do with it. It’s impossible to put a price tag for a commodity in Bitcoins not knowing how much the Bitcoin would be worth in a set time in the future.

Bitcoin has three major things going for it -total anonymity, total security, and rarity. With Bitcoin, there would be no use for large vaults and ledgers thanks to the Blockchain. The security is virtually impenetrable. In addition, the Bitcoin ledger is available to the public. You can’t steal Bitcoins, you can’t create Bitcoins, and you can’t counterfeit Bitcoins.

Just imagine a world where people can openly trade without having any third-party executor that takes a part of the profit. The terrible part of this notion is that Bitcoin does not have any physical entity and the whole system is not regulated by any form of government. That means that there is a HUGE opportunity to manipulate the value of the Bitcoin, and the opportunists would not be accountable to anything.

It is also important to consider that Bitcoin’s impenetrable security is only secure because the current technology is not yet able to brute force its way into the hash-cash of Bitcoin. Bitcoin is a crypto-currency in essence, based on the mathematical discipline of cryptography, and uses the same techniques used in modern encryption systems such as RSA.

For your knowledge, modern computing power is unable to crack such systems, due to their mathematical complexity (prime factorization) in addition to the computational unfeasibility of today. Eventually, the technology would catch up and Bitcoin’s security will be kaput. There’s no telling how, or when the technology would be made, but it is certain that it would happen in the near future. So Bitcoin is not sustainable, how can we consider it as a currency?

The whole hype for Bitcoin is because the value skyrocketed 4000% in the past year. It’s like the unregulated, intangible version of gold in the market. Since the trading is unregulated, it is fair to speculate some sort of manipulation in trading Bitcoins. According to CNBC, the surge is attributed to an increased interest in the Chinese market. Since the trading is not regulated, and the transactions are anonymous, it is virtually impossible to prove that Bitcoins are being manipulated. As impenetrable as Bitcoin may be, the people trading them are not. Until the Bitcoin is declared by a government as a legal tender, the value of the Bitcoin is just a collective opinion.

When will the Bitcoin bubble burst?

It’s tough to tell, but with the Chinese clamping down on Bitcoin transactions, we may have seen the tip of the blade that punctured Bitcoin. On December 18, 2013, the People’s bank of China, asked the 10 largest online third-party payment institutions to stop dealing in Bitcoin. Prior to the move by the Chinese government, 1BTC (Bitcoin) was worth as much as 1200 USD. After the announcement made by the Chinese government, the prices for the Bitcoin plummeted – as much as 50%.

Bitcoin Growth and Fall ChartThe Chinese government is worried that the Bitcoin would take their local currency (yuan) out of the country. The confidence in the currency started to plummet and it is most notable in its pricing. Experts believe that this would be the start of the downfall for the crypto-currency. If the other countries follow suit, it would spell the end of Bitcoin – leaving Bitcoin traders with literally nothing to show for it. So, are you still interested in getting those Bitcoins? Let us know in the comments.

About Ali Gajani

Hi. I am Ali Gajani. I started Mr. Geek in early 2012 as a result of my growing enthusiasm and passion for technology. I love sharing my knowledge and helping out the community by creating useful, engaging and compelling content. If you want to write for Mr. Geek, just PM me on my Facebook profile.