The Star Quarterback is Showing Its Age

Bitcoin has always been the face of the crypto currency market in general, but its success in the market has proven to be a double edged sword. The more popular it has become, the further away from its original intended use case it has been taken. As a currency that was meant to replace fiat, it is now failing, halfway to the goal line, for a few reasons.

Price Volatility

Who wants to buy a stick of gum today for 25 cents, only to find out the next day that that 25 cents can now buy them a
gum factory? The volatility of the price driven by mass speculation in 2017 has made it very hard to see bitcoin as anything other than a stock investment for the majority of those wading in. But unlike a stock, which is generally evaluated on some level by the performance and results that a company produces, Bitcoin (and other alt-coins even moreso) is in many ways pure speculation. Prices surge and fall from day to day with no rationale other than the splashes of the whales' tales as they throw their weight around.

Insane Transaction Costs

Transaction prices outside of the exchanges have made using bitcoin as a currency way too expensive. I am seeing reports that an average transaction cost right now is around 50 dollars. That just doesn't work for basic day-to-day transactions outside of the realm of speculative investments. I'm certainly not going to buy a 10 dollar pizza from Papa John's for 60 bucks before tip!

Energy Costs are Soaring

According to this article by Andy Reed,

The energy used by a single Bitcoin transaction could power the average U.S. household for eight days.

I'm no tree humper, but clearly this kind of energy consumption is not sustainable for mass adoption of bitcoin as an everyday transactional currency.

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Crypto Diversification is a Myth

With all of these problems inherent in Bitcoin, there is much talk of "diversifying" into additional alt-coins. Unfortunately at this point in the game, Crypto diversification is like expecting the rest of the team to carry the championship game while the quarterback is literally filling his uniform with diarrhea, mid field.

Here's a screenshot of the top coins during the post-Christmas crash correction.

As anyone who has been riding the roller coaster lately has noticed, when Bitcoin dips, so does every other coin in the market. Its basically like watching a drunken rendition of the Cha Cha slide at your cousin's wedding. There may be a couple of people so drunk that they are a few steps behind, but eventually everyone follows the leader. This drunken hysteria that is the current state of crypto investing places Bitcoin on the pedestal of lambo and yacht acquisitions, and as long as it is on this pedestal, it will be very hard to actually diversify in crypto.

There is a second, perhaps more tangible issue is that there are very few ways to purchase alt-coins without directly buying Bitcoin. Coinbase is of course the most popular funnel for USD into crypto, but since there are only currently 4 coins that are purchasable there, it forces Bitcoin, Ether, Litecoin, and BCH to be used as fiat gateways.

Bitcoin Needs to Retire for Diversification to Flourish, but Doing So Could Kill the Market

Given the volatile, speculative nature of crypto investing, it would be great if investors really could hedge their bets within the crypto space in a safer fashion. As long as alt-coins value is directly tied to BTC, this will be very difficult to do. If these alt-coins can find a way to stand without BTC, it is good for everyone.

2 Ways Bitcoin Can Die

Burn Out

As more and more people come to terms with the technical and practical limitations of Bitcoin as an actual currency, public confidence will gradually be eroded. At some point another external announcement or event could be enough to trigger a massive crash once confidence drops to a certain point. If Bitcoin crashes at the point, the question will be whether the market's confidence in the entire crypto market is still directly tied to BTC, and also whether BTC is still ostensibly the fiat gateway. If the public has weaned itself from the notion that BTC = the entire crypto market and if more exchanges offer ways to buy alt coins directly with fiat, then perhaps these other coins will survive such a crash.

If public confidence is low in the alt-coins ability to stand alone and if the exchanges are still forcing BTC as the pass through currency, then this type of crash could be the bursting of the bubble that will end all of our fun and leave our dreams of lambos in the junk yards of what could have been.

Fade Away

Probably the more healthy, safe alternative would be if Bitcoin gradually just fades away. No big drops, just people selling off slowly to invest in other new, more exciting alt-coins over time. If everyone is busy making money elsewhere, then BTC's erosion could barely be a blip on the radar as the media would focus on the newest coin making millionaires instead of on BTC dropping a little bit more. In this scenario, the exchanges will have plenty of time to continue adding more alt coins to be purchased directly with fiat, and in turn the market's actual reliance on BTC as a gateway will gradually diminish. The market will raise new alt coins on pedestals that will eventually reach the same heights as BTC, and then surpass it, climbing ever higher toward those lambo shaped clouds in the sky.