For the first time ever, bitcoin no longer holds more than half the value of all digital currencies as its market share has been dropping like a rock for the past two months, down from around 80% to now less than 50%.
The only time bitcoin has found itself in such a situation is after the MT Gox disaster which led to the loss of some $1 billion and a depressed mood that went on for around two years until the market turned around in 2016 and began a bull run.
That bull run was sparked and then accelerated by monetary mismanagement across the world, spanning China, India, Venezuela, Nigeria and many other countries which was in part caused due to a sharp fall in oil prices, leading to high inflation for oil exporting nations.
People flocked to the currency to retain monetary value, sending price up and up, above gold. Then, the prospect of a bitcoin ETF seemed within reach, but the Securities and Exchange Commission, in potentially a historic decision, rejected the ETF.
In the meantime, the very heated scalability debate reached culmination as Core and Unlimited went head to head, ending up in a stalemate. Once a stalemate, with its implied stagnation, became known to the market, many apparently began diversifying.
Monero had a bull run, Dash, Ethereum, Litecoin, now Ripple, in the process increasing the combined market cap of all digital currencies to an all-time high of nearly $57, seemingly adding $10 billion a week for the past three weeks.
Bitcoin too has gone up in the meantime, with the currency now very much mainstream as far as brand name is concerned as it has been featured in front page papers and prime tv news shows.
However, its value increase has been far slower than other currencies, primarily because its utility has been lowered as its capacity is limited. Fees, therefore, have skyrocketed, businesses have diversified, mainly to ethereum, investors have too.
In some ways, the currency is in crisis. It is losing market share, it is losing network effects, it’s far behind in innovation especially pertaining to smart contracts which is giving ethereum a lead in blockchain’s industrial implementation, it’s slow and it has become expensive.
Some of this could be addressed in just one week. The developers who signed the Hong Kong agreement can decide to do the honorable thing and uphold their end of the bargain by pull requesting a maxblocksize increase into Bitcoin Core as they promised they would do.
Their failure to do so might be one of the main reason for bitcoin’s current predicament, but all this is beating a dead horse as many seem to have concluded why bother with arguing when other coins can give you exactly what you want while being treated like a prince on a red carpet.
So, people are leaving, as anyone could have predicted and did predict. There was always talk that another coin would come that does things better than bitcoin. Well, they might be here now.
Does that mean bitcoin has failed? No, it all works, but it could work a lot better and the reasons for why it isn’t will likely become textbook examples of what not to do, of what conventions and norms must be upheld, etc.
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Last modified: May 21, 2020 9:49 AM UTC