However, every investment comes with potential downsides, and Bitcoin is no exception. Sciberras says on the negative side of the ledger, there are concerns about Bitcoin's long-term security as the block reward will continue to decline.
Furthermore, short-term selling pressure could also have a negative impact on the price of Bitcoin.
Then there is the controversial debate over “inscriptions” on the Bitcoin blockchain. While Sciberras acknowledges their potential to generate long-term sustainable fees for the protocol, particularly as more Bitcoins become more in circulation and miners' dependence on fees increases, he also points to the divided opinions within the community regarding their impact on the functionality of the network there.
Notably, a respected original Bitcoin developer, Luke Dashjr, calls inscriptions “spam.” He argues that they overload the network, making the mining process and overall support of the network difficult. This difference in perspective creates the conditions for a possible ideological conflict within the Bitcoin community.
Another problem is the environmental and political impact.
“There are ongoing attacks on the environmental impact of Bitcoin, with the White House proposing a tax of up to 30% on Bitcoin miners in the US,” says Sciberras.
If Bitcoin continues to be criticized for its energy consumption, it could jeopardize its price performance.
“In the worst case scenario, we see Europe trying to reintroduce a ban on (proof of work), which was the case.” attempted in 2022 but was quickly put down.”
Sciberras adds that spot Bitcoin ETF applications also pose a potential risk if they are rejected, leading to a short-term sell-off in BTC.
A change in government sentiment towards Bitcoin and cryptocurrencies could also lead to a price decline.
“The US is becoming more and more hostile towards cryptocurrencies and Bitcoin,” says Sciberras.
Additionally, if Bitcoin threatens countries' monetary monopoly due to widespread adoption, governments could take action to restrict it.
Sciberras points out that a recent bill in the US to expand the Bank Secrecy Act and impose stricter reporting requirements for digital currency transactions, including those involving unhosted wallets, is a cause for concern.
“In its current form, this legislation would cripple the US crypto industry,” he says.
Investors are also concerned about the impact of Anti-Money Laundering (AML) and Know Your Customer (KYC) laws. Sciberras points out the unique challenges of enforcing high reporting requirements for transfers to private, self-hosted wallets.
“AML laws remain a major battleground and could pose a threat to the industry as compliance could be extremely difficult,” says Sciberras.
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