Many of us, at some point in the last five years, have been curious about cryptocurrencies.
The ones most curious and daring surely have tried to understand how exactly the Blockchain system, which is behind Bitcoin, works. After dense texts and tedious video tutorials, many still do not fully understand how it works.
On the other hand, others would prefer to ignore the logistics behind cryptocurrencies and simply have seen how, after a drop of more than 80% in value in 2018, some of them have recovered part of their value, such as Bitcoin.
Alternative payment method?
Cryptocurrencies are too volatile to be used as a payment method: if somebody wants to have bitcoin, he or she must first go through a fiat currency, and the exchange rate will mark the purchasing power, which will be sharply altered every day.
Therefore, we would not be fully able to determine our purchasing power or wealth, as it would be very volatile.
Secure payment method?
Whether or not we understand how Blockchain works there is widespread agreement among experts that it is a closed system with very high security.
However, there is a key element in the equation: third-party providers. They offer services necessary for the purchase and sale of cryptocurrencies. An example is the web pages that offer wallets or portfolios, which have already been victims of computer attacks that have ended in the theft of cryptocurrencies.
Digital gold?
It is true that Bitcoin bears certain similarities with gold. For example, the supply of both is finite: gold on Earth is a scarce and limited resource and Bitcoin has a pattern of creation that tends to a specific number.
Despite the fact that new Bitcoins are generated every day, the supply is marginally decreasing, which makes it easy to calculate their final amount (which in mathematics is known as a geometric series).
However, the label of "store of value" is generated from trust, and the great volatility of Bitcoin makes it difficult for the average citizen to trust something which value is so abstract as well as changeable.
Delinquency
Because the transactions are anonymous, Bitcoin can serve as a haven for those who obtain money illegally. This involves risks, offering an alternative method of saving dirty money.
Currency value
As long as citizens have payment obligations to the state (taxes) with legal tender fiat currency (such as the Euro or the Dollar), Bitcoin will always be in the background.
The argument that Bitcoin is not manipulable by any politician is true, but it appears that this "manipulation" by the market has even greater volatility.
Investment or speculation?
Therefore, everything seems to indicate that cryptocurrencies would be closer to speculation than investment.
Anyway, and paraphrasing Warren Buffet when asked if he would invest in Tesla, who said: "I would neither buy Tesla nor bet against it", the same is applicable to Bitcoin: even though we could believe that the value of Bitcoin is going to go up, it would be very risky to buy it, and vice versa.
This seems the most reasonable answer, since the risk is such that the chances of losing are very high in both cases.