What are the limits of Bitcoin?

The most famous cryptocurrency has made a lot of headlines during this year 2017 thanks to the evolution of its price which went from about $1000 / bitcoin in January to almost $20,000 / bitcoin in December. Faced with such a change in the price, the question of the limits of Bitcoin arises.

>A quantity set at 21 million units:

A first limitation of bitcoin is that, unlike traditional currencies regulated by central banks, cryptocurrency is decentralized and has a maximum quantity set at 21 million units.

The creator of Bitcoin, Satoshi Nakamoto, defined this limit at the launch in 2009. Today, Bitcoin’s supply is around 16 million units and it is estimated that the 21 million Bitcoins will be in circulation around 2100-2150.

Even if this date does not represent a near deadline, it could still be a barrier for investors who do not know how to manage this quantity factor.

The use of Bitcoin in the world :

A second obstacle to the democratization of Bitcoin in the world is the legal aspect around it. Indeed, legislation around Bitcoin varies according to countries ranging from Japan, which has recognized Bitcoin as an official means of payment, to Bolivia or Ecuador, which has established prison sentences for users or holders of cryptocurrency.

In fact, this “hidden” part of the Internet is managed by mafias that offer goods or services (drugs, hitmen, weapons…) payable in Bitcoin. The proportion of transactions carried out on the Darknet represents a tiny fraction of transactions carried out in Bitcoin, however, this proportion could increase in the coming years because Bitcoin, by virtue of the anonymity of the transactions it provides, facilitates all money laundering or criminal network financing activities.

>Bitcoin futures contracts:

Bitcoin, not being a regulated currency such as the dollar or the euro, can see its price increase or decrease by half in a few hours. These variations, resulting in high volatility, attract many investors who want to make large profits in a short period of time. However, profit prospects should not make investors forget that this practice is high risk.

Since December 2017, it is now possible to invest in futures contracts with Bitcoin as their underlying. Indeed, it is the CBOE Futures Exchange in Chicago and soon the CME that will offer this financial instrument. The consequences of the creation of this new product could be a reduction in volatility on the price of cryptocurrency as well as an increase in trading volumes due to greater involvement in bitcoin exchanges by other financial institutions.

>Conclusion:

The points mentioned above highlight some of the limitations of Bitcoin at different levels, whether they are purely related to its functioning, its legal framework, or the development of its use by large institutions.

A final problem often raised by opponents of Bitcoin and its ecological aspect. Indeed, mining, a step allowing the validation of the transaction, requires extremely high energy consumption mainly due to the use of high-performance computer equipment. However, in the future, perhaps less energy-consuming tools will make it possible to carry out these operations, which are essential for the smooth running of transactions.

Florent Bouilly

https://fr.investing.com/currencies/btc-usd-chart

http://www.lefigaro.fr/economie/le-scan-eco/dessous-chiffres/2017/08/26/29006-20170826ARTFIG00017-record-apres-record-jusqu-o-ira-le-bitcoin.php

https://www.crypto-france.com/bitcoin-blanchiment-argent-transactions-commerciales/

https://www.boursier.com/actualites/economie/premiers-contrats-a-terme-explosifs-sur-le-bitcoin-37623.html

http://www.businessinsider.fr/bitcoin-futures-cboe-global-market-premiers-echanges-2017

https://www.latribune.fr/bourse/cme-group-prepare-des-contrats-a-terme-en-bitcoins-756344.html

Florent BOUILLY

Florent BOUILLY


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