[Column] A mountain for Bitcoin to overcome

Bitcoin price has been flat for a long time after falling. In fact, this level of sideways movement is a very short period in terms of stocks, but since the cryptocurrency market is so volatile, it feels like it cannot recover for a long time even after a month has passed. Just a month ago, all the followers of Bitcoin, which had peaked at 80 million won a month ago and seemed to be over 100 million won soon, went down in just a month due to bad news about mining bans from China and government regulations. showed a drop of more than 50%, fell to the range of 36 million won, and then recovered to the mid-range of 40 million won and is moving sideways. (As of June 15, 2021)

Until the beginning of this year, there was widespread belief that Bitcoin would cost 100 million won, and as institutional investors around the world were buying, the perception that Bitcoin would replace so-called gold was widespread. Experts agreed that Bitcoin has a limited issuance volume, so it is possible to hedge against inflation, and the number of uses has increased, and the foundation as a virtual asset has been laid with the participation of traditional financial institutions.

But over time, many of those rosy prospects seem to fade a bit. Under the influence of the mining ban from China and the government’s hard-line stance, the Bitcoin price plunged by more than 50%, leading the decline of other coins. In this wind, there was even a story that an investor from a famous domestic reporter was even called a margin call, and the market was overflowing with fear, and the message poured out that Bitcoin still has a long way to go. And a few days ago, the South American parliament of El Salvador passed a resolution recognizing Bitcoin as a legal currency, and even though the world’s first Bitcoin rose to the status of a national legal currency, the price is hardly recovering.

Looking at the details of the debate over the value of Bitcoin, even relevant experts are unable to convince “Bitcoin skeptics” such as Minister of Justice Park Sang-gi in early 2018 or writer Yoo Si-min who shouted “Bitcoin scams”, Most of those who view it as a skeptic are still skeptical. Skeptics who are accustomed to the existing traditional financial system argue that Bitcoin can be a means of payment but cannot be a currency because money means money issued by the state, and Bitcoin, which is highly volatile, is a safe asset such as gold. It is also argued that it is difficult to see

As Elon Musk asserted, concerns about environmental pollution caused by bitcoin mining are added, and the industry, which reflects the trend of ESG management spreading around the world, is not receiving support from the industry. Of course, on June 14th, Musk said that he would again recognize Bitcoin as a payment method for Tesla, but Musk’s influence, which once lost trust, doesn’t seem to be as powerful as it used to be. The risk of environmental pollution in bitcoin mining has been around for a long time, but Microsoft founder Bill Gates has long pointed out that the environmental cost of bitcoin mining is huge. They claim and criticize the country’s electricity consumption. However, even this claim is difficult to compare due to lack of accurate statistics, but it is almost clear that the fossil fuel consumption used by the state and traditional financial institutions to issue, maintain, and manage money is much higher than the amount of electricity required for Bitcoin mining and node operation. it looks like

Recently, a lot of investors have been asking me about the Bitcoin price forecast. However, the difference from the past is not asking how far Bitcoin will rise, but will the price recover again? Conservative questions about when to recover have increased a lot. It is evidence that investors have become more cautious with a few experiences. At this point, in my view, there are several hurdles to overcome in order for Bitcoin to establish itself as a currency or as an asset that replaces gold.

The most urgent of these is the stabilization of the Bitcoin price. If the price repeats up and down by 50% as it is now, it loses trust in the financial sector and loses its qualification as an investment product. However, the price volatility part is likely to stabilize at a fairly rapid rate. The reason is that, unlike in the past and 2017, Canada’s Bitcoin ETF approval and the US are expected to allow the launch of related products soon. This is because they realize that in the end it is in their own advantage. And the fact that global financial companies are investing significant amounts of money into bitcoin investment without realizing it means that experts also recognize bitcoin as an investment product.

Historically, when a new technology appears, a rosy fantasy about the related industry overflows, and a bubble occurs, impatient investors flock to it in the beginning, creating an investment bubble that is close to madness, and the volatility of related products fluctuates greatly, then the bubble burst The price has been gradually stabilizing. Bitcoin seems to be going through a similar process.

Another hurdle to overcome is the processing speed of Bitcoin. Currently, it takes about 10 minutes to create a block of Bitcoin. At this rate of processing, it cannot serve as a bill. Of course, various efforts are being made to reduce the block creation time, and the position of the coin, which plays an intermediate role in the payment process that implements a fast processing speed based on the block chain, is getting faster. There is no reason to buy and sell gold, which is a representative asset preservation method, that has to be processed within 1 second. Likewise, the main reason why Bitcoin price is high and continues to be in the spotlight is that it is useful as a means of asset preservation rather than as a currency.

And technical problems such as hacking of Bitcoin have been consistently verified over the past 10 years, so this belief is not likely to be broken for a long time. Therefore, the highest mountain that Bitcoin must overcome in order to firmly establish itself as a digital asset is, above all, the reduction of price fluctuations. However, Bitcoin, with over 200 million holders worldwide, believes that it will surely overcome this lofty mountain thanks to its staunch followers.