1.5. Bitcoin’s Limitations
Bitcoin’s Limitations as a Store of Value:
1. Lack of an Internal Economy.
Bitcoin does not have an internal economy that generates real revenue or stimulates demand for its coins. It has also failed to establish itself as a widely used payment method due to high transaction fees and usability issues. Its value is entirely speculative, based on the expectation that future buyers will pay a higher price— a concept known as the "greater fool theory."
Unlike national currencies, which derive demand from economic activity such as the production of goods and services, Bitcoin is not backed by any intrinsic value-generating processes. This makes it entirely dependent on speculative interest, leaving it structurally vulnerable.
2. Major Price Crashes Undermine Bitcoin’s Role as a Store of Value.
Bitcoin has repeatedly suffered 80-90% crashes from its peak price, which undermines its positioning as a safe asset for wealth preservation. Investors can see a significant portion of their holdings vanish overnight, creating an atmosphere of fear and uncertainty. This volatility makes Bitcoin more of a speculative trading instrument rather than a reliable long-term store of value.
3. Bitcoin Mining Causes Severe Environmental Damage.
The Bitcoin network consumes approximately 150 TWh of electricity annually, which is greater than the energy consumption of an entire country like Argentina (population 45 million).
Generating this amount of energy results in approximately 65 megatons of CO₂ emissions per year, equivalent to the total emissions of a country like Greece. This raises concerns about Bitcoin’s long-term sustainability, as mining exacerbates the global climate crisis.
4. Bitcoin Lacks a True Deflationary Model—It Is Merely Supply-Capped
While Bitcoin’s supply is capped at 21 million coins, this does not constitute a true deflationary mechanism. Some coins are lost due to users losing access to their wallets, reducing the circulating supply, but this occurs randomly rather than as part of a deliberate economic model.
Fundamentally, Bitcoin is no different from company stocks with no additional issuance, as their supply is also fixed. Labeling Bitcoin as a deflationary asset is therefore misleading.
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