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Why People Dislike Cryptocurrency

What puts people off from becoming early adopters of a particular cryptocurrency, or cryptocurrencies in general?

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Within the last five years, cryptocurrency has gone from an esoteric secret in obscure software developer circles, to a household conversation topic. Investors, and speculators took note in December 2017, when Bitcoin’s price soared over 2000% in under six months.  Despite the popularity, Bitcoin’s internal mechanism was unknown to most. Roughly 35% of Americans haven’t even heard Bitcoin, according to estimates. When talking about it with strangers though, you might still hear things like “its like money without banks”, or “its mostly for the black market”, or “its all stored on a computer somewhere, so how can it have value?”, and many others similar retorts. Since Bitcoin has seen a tenfold increase in market cap in the last two years, you are bound to hear people talk about Bitcoin sooner than later.

A lot of the pessimism and doubt usually comes from a lack of understanding of what purpose it intends to serve. Education is key, when treating blockchain technology as an investment. Despite there being many upsides to the tech, many people, and several seasoned investors, have a hard time getting into the crypto markets. But the criticisms and concerns that the general public and governments have of Bitcoin (and for Cryptocurrencies in general) are, for the most part, reasonable. The reason for this is our global financial history and bitcoin’s apparent lack thereof, and it is worth exploring.

Why prudent investors, and skeptics generally don’t like cryptocurrency

If you are a careful investor, or use fundamental analysis, chances are that you are a already a crypto-skeptic. But you may not be alone. Cryptocurrencies like Bitcoin are a relatively recent invention. With its market cap increasing 10-fold in just a year in 2017, it has become obvious that the financial phenomenon of cryptocurrencies cannot be ignored. But that could also be a part of why historically well performing prudent investors, and very many new investors  are wary of it. Despite this recent success, there are many things about it that dissuades new investors and adopters. Here are some of those reasons:

Association with the black market

“Its just for drug dealers and the dark web”

A study estimated that 44% of all online bitcoin transactions were used in the black markets in 2017. In the take down of international Dark Web site Hansa in 2017, 12000 bitcoin were seized by the Dutch police. That surmounts to about $88 million, from just one market. Cryptocurrencies’ role in modern black market is no secret. Certain features built into some cryptocurrencies make them suitable for private applications. Serious financial investors cannot afford to be on the wrong side of the law.

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In recent times, bitcoin has dropped from being the dark web’s favorite coin, and others have taken its place. It is unfair to paint all cryptocurrencies with a broad brush. The stigma of association to the black market, however, will be hard to remove.

It is entirely virtual

“If its all on a computer, it could all just disappear some day”

A common concern that people have of Bitcoin (and cryptocurrency in general), is that it does not take physical form. According to the founding document of Bitcoin, it was designed to behave like a peer-to-peer digital currency. Though you can secure your secret key in a physical device, or buy a hardware wallet and create an offline storage to send your bitcoin to, the currency itself can never exist in physical form. This virtual nature is a deterrent to conventional investors.

People think that digital wallets are less secure than banks. Others think that the fact that it is entirely digital means that it can be stolen by someone just clever enough. Or an electromagnetic attack. Seriously.

The speculative binge, scammers, and volatility

“Nothing with that much volatility and sudden rise could ever be fundamentally good”

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From the years from 2011 to 2017, the price of bitcoin has growth roughly 6 folds between December and January. In May 2018, the price has moved $3000, or 33% from its peak. People using cryptocurrencies as currencies don’t like such massive swings in price. And people trying to save their money look for long term growth in value.

At the peak of the price bubble in 2017, there were references to the price of Bitcoin from everything from SnapChat stories, to CNN segments. People took serious risks to buy bitcoin at the peak of its speculative bubble in late 2017, like taking second mortgages on their houses to buy bitcoin. These large swings in price, and the frantic hive-mind behavior of investors, genuinely scare off careful investors.

Hacks of exchanges, and other financial software services was relatively common in 2017. An estimated total of $140 Million was stolen by various hackers.

A newer dimension of scammers have emerged with ICOs. ICO, or Initial Coin Offering, are releases of new cryptocurrencies. Much like stock IPOs, they inspire all the speculative binging from the underbelly of the markets. 2017 was a year of hundreds of thousands of dollars of ICO scams.

Apparent difficulty to use

“How do you even get some Bicoins?”

Acquiring cryptocurrency can a complicated process. In order to acquire cryptocurrency, you either have to exchange money or work for it, or mine it. In order to be able to buy or work for cryptocurrency, you have to own a wallet. You can either keep your own private wallet and secure it yourself, or have a shared wallet on an exchange. In the US, you will most likely have to disclose your social security number, address, and other personal details to get a valid exchange account. Certainly not a quick process.

Many people assume that mining is the only way to earn currency. Any new technology with complicated sounding words sounds flashy and fleeting to most layman.

Widespread adoption is hard for newer currencies

“Where can I use them?”

Adoption is the holy grail for all legitimate cryptocurrencies. Vendor confidence is a big factor for a currency’s acceptability. Alternate cryptocurrencies users worry about their favorite altcoin losing popularity. According to CoinMarketCap, here are at least 1350 publicly traded cryptocurrencies as of May 2018 and virtually every single one of them will have to earn their adoption. With every new currency that is released, singular global adoption becomes less likely for any one currency. For some, this seems like a negative long term trend for the technology. For others, this provides a technological security against oligopoly and attack-by-volume.

Its value

“Who knows what its worth?”

Perhaps the most fundamental problem that people have with cryptocurrencies, is the fact that people are not sure where their value comes from, if it has any at all. To the layman, it is not obvious that forgery would be hard or impossible. Granted, most people do not have any idea where the value for their existing money comes from. For instance, most pro-dollar crypto-skeptics might not be aware of the rate at which the dollar is depreciating. But they are less willing to venture into a new financial realm, full of its own risks and rewards. After all, the assessment of value is a personal, subjective action.

But is it worth looking up?

Whether you agree in its use or not, the global impact of cryptocurrency cannot be thrown aside lightly. There are very rational reasons to be wary of cryptocurrencies, and there is very strong evidence that it is a promising technology. In years to come, the core features of cryptocurrencies will grow organically, and aide and disrupt separate classical industries that we are familiar with today.