Bitcoin: Threats and Opportunities

Threats

  1. Competition: A coin with better characteristics might take over.
  2. The law: Governments might make crypto currencies illegal.
  3. Interest rate: If Governments raise interest rates, all other assets will lose value. Including Bitcoin.
  4. Internal problems: People in power can change the money distribution via social engineering. See the Ethereum fork related to the DAO in 2016.
  5. Storage: If you store your secret key yourself, you might lose it in one way or another. If you let others hold it for you, they might lose it and go bankrupt.

Opportunities

  1. Banks: Currently it is complicated to buy bitcoin. If normal banks or Paypal would sell it, this would dramatically lower the barrier for retail investors. Paypal already offers to hold Bitcoin for users in the USA.
  2. Companies: It might become common practice for companies to hold some part of their cash in Bitcoin. Ark invest estimated that if the S&P500 would hold one percent of their cash in Bitcoin, this would double Bitcoins market cap.
  3. Store of value: If Bitcoin becomes a store of value half as popular as Gold, this would raise Bitcoins price by roughly a factor of five. If it becomes a store of value as popular as paper gold it wold raise the price more than 100-fold.
  4. Inflation: Nobody knows how the current zero interest experiment of the USA and Europe will end. If it ends in hyperinflation, Bitcoin would rise relative to the Dollar and the Euro dramatically.
  5. Payments: With new technologies like the lightning network, Bitcoin could become a currency for day to day payments. It then might become the most popular currency, overtaking the Chinese yuan which currently has a market cap 36 times higher than Bitcoin.