Bitcoin is now the biggest cryptocurrency in the world. It is used in many countries to make financial transactions. This has led to a significant fluctuation in the crypto market over the past few years with Bitcoin hitting both its highest point and a significant drop in recent months. We'll be looking at some of the problems using Bitcoin to buy a car and how the AutoCoinCars' service tackles these.
However, Bitcoins are still not as widely adopted as a credible means of making payments. What’s the reason behind that?
Experts speculate that Bitcoin will reach $100,000 by the end of 2027. Although that still could be possible, the problem with such speculation is that it makes people question the purpose of Bitcoin.
Is it a currency, a unit of a transaction, or is it a unit of investment?
The failure to get the answers to these questions is hindering the widespread incorporation of cryptocurrency in our daily transactions.
Still, many vendors have begun to accept Bitcoins as a currency for buying and selling goods. The automotive industry, for example, has seen a growth in the number of dealerships that allow the purchase of cars using Bitcoins.
However, people encounter several problems – due to the lack of knowledge – when using Bitcoins to buy cars. Most of these problems are also linked to the inhibition of people to invest in Bitcoins.
In this blog, we have discussed some of the problems that people face when using Bitcoins to buy cars. We have also outlined the solutions to these problems.
Let’s get started.
7 Common Problems Surrounding Bitcoin Adoption
Limited Availability
There are around 13 countries where Bitcoin is considered legal. It is used as a currency of the transaction. Many of these countries also have ATMs available where people can get Bitcoins or redeem local currency in return for Bitcoins.
However, the world has over 200 countries, and 13 countries adopting Bitcoin means the adoption ratio is less than 5%.
Considering that Bitcoin has existed since 2010, we can say that the penetration level of a mere 5% in the last ten years has stagnated the growth of Bitcoins.
In some countries, Bitcoins are not considered a currency, but they are not illegal. It means people can trade in Bitcoin, but they can’t use them as a unit of currency.
On the other hand, in some countries, Bitcoins are entirely banned for trading. These countries have strict regulations to prohibit people from mining and using Bitcoins.
So, there is no such solution to this problem currently. However, the good news is that if you live in a country where it is legal, you can easily buy products directly by using Bitcoins.
Tax Issues
Even in the USA, Bitcoins are not considered a currency but a unit of investment. That is why it is taxed under US law. They are similar to stock trading reports, and owners have to report the gains and losses to the tax authorities.
Since they are ‘intangible properties,’ they are subjected to capital gains taxes by the IRS. In simple terms, if you buy Bitcoin at a price and then sell it at a higher price, then you will have to pay the tax on the excess amount.
The reason most people don’t keep Bitcoins is that they have to record every transaction, and that takes a lot of time.
Unfortunately, there is no solution available to such a situation. You can always purchase products with Bitcoin if you keep a track record of everything you do during a fiscal year. Most products are a lot cheaper when people pay through bitcoin instead of US dollars.
High Volatility
Yes, Bitcoin is a highly volatile currency. One year ago, Bitcoin climbed to $68,789.63 per coin from $30,000. Now it is back at $18,000.
In the last two years, the currency has been highly unstable with major fluctuations. However, if we track the trend over the previous two years, it remained relatively stable, and this is one reason people are afraid of investing in Bitcoin.
Most of them fear that if they buy Bitcoin and the prices tank, they will have to incur huge losses. Currently, Bitcoin is a lot more popular among traders than the general public. That’s why it is not getting adopted as quickly as some may like it to, but the trading cap of the currency is rising rapidly.
People fear buying stakes in high-risk investments, and if there is no control over such an asset, it can never be used as a currency.
Country-Specific Regulations
Another reason Bitcoin is not used as a currency in most countries is that they have enacted regulations to either ban it or stop its trade.
Most countries have taken strict measures because they believe it can tinker with their national currency and can become a hurdle in sustainable growth.
Take Pakistan and India, for example, where Bitcoin exchanges are raided regularly.
Bitcoin businesses have ceased in both countries, and the state banks have barred people from trading in Bitcoin. To circumvent this, people create Dubai-based accounts to trade in Bitcoin while living in these countries.
Similarly, in China, the government is cracking down on bitcoin businesses to control the flow of currency.
Competing Currencies
There are many cryptocurrencies now available in the market. An average investor doesn’t know which cryptocurrency is worth investing in. Because every expert has some stake in a cryptocurrency, they direct these small investors to buy the currency they are promoting.
It has also led to lower adoption of Bitcoin. People who previously traded in Bitcoin are now trading in Ethereum, Litecoin, Bitcoin Cash, XNO, and many other cryptocurrencies.
As said, there are now many options available to users. Most of the other cryptocurrencies even offer better returns than Bitcoin, and that’s why people trade in them instead of Bitcoins.
The solution to this is if Bitcoin makes a deal with some prominent multinational companies like Google or Facebook. If the industry giants back them, the trust of investors will develop, and they will be more than likely to invest in Bitcoins again.
The good news on this front is that Facebook outlined its plans to launch its cryptocurrency ‘Libra” in 2020. With such a big name entering the cryptocurrency world, we can be sure of the increased usage of bitcoins and other forms of cryptocurrencies.
Threats of Digital Hacks
Numerous hacking attempts have been made on Bitcoin exchanges, causing heavy losses to Bitcoin users. It is another reason for the low adoption of Bitcoin.
People looking to invest in Bitcoin want to make sure it is entirely secure to invest in. Although Bitcoin is safe, the exchanges and the wallets people use are not. That’s why they fell prey to these hacks.
One way to solve this problem is to rebuild the trust of people and make them believe that mining and using Bitcoins is a secure process.
Moreover, people will have to realise that Bitcoins are not hacked because of weak source code but because of the security software Bitcoin exchanges and wallets use to store user data.
To alleviate these fears, insurance companies need to come forward to provide additional security by offering compensation for the Bitcoin value if a user is a victim of a Bitcoin hack.
These insurance companies would have to work with crypto exchanges to promote Bitcoin as a safe payment option. It is the only way to increase market adoption.
Scalability
Finally, Bitcoins are limited in number. They can’t be minted based on user demand. It is one problem that has no solution.
The global population is continuously rising. We need more Bitcoins to make payments. Since Bitcoins are only 21 million and 17 million of them have already been mined, they can’t be scaled at will.
It will make Bitcoins a limited commodity. A scarce commodity is not used as a currency but as an investment option.
Similarly, another major problem with the Bitcoin network is that it allows only a capacity of about three transactions per second. So, how can it be mass adopted?
If people adopt it, they will want to do several transactions per second. It is something the cryptocurrency simply can’t achieve with the current network system in place.
Bitcoin is competing with traditional means of transactions that are way faster. For example, the VISA credit card processes 2,000 transactions per second.
Bottom-line
These are a few problems faced by people when using Bitcoins as a means to buy cars. However, these problems have easy solutions.
If state governments, MNCs, and International Government Organizations (IGOs) decide to accept cryptocurrency as a form of transaction, these problems can be easily solved.
So where does AutoCoinCars come into all this?
We are pioneering the way for the automotive industry when it comes to Bitcoin and other cryptocurrencies. One of the biggest problems we solve here is the volatility of crypto. We accept the crypto and convert it for you so that regardless of market fluctuation, you know that the dealership will be paid in full for the car you want in their local currency.
Along with our secure test transaction process and other compliance procedures to ensure your safety as a customer during the use of our service, you can rest assured that you are buying a car with Bitcoin from a trusted service.
Nowadays Bitcoin is still the number one crypto on the market, but there are many others rising in strength such as Ethereum and Binance Coin, both of which are accepted payment methods at AutoCoinCars.
If you'd like to know more about how simple, secure, and fast it is to buy a car using Bitcoin from AutoCoinCars, give us a call!