An article out today in the Economist lists several reasons why Bitcoin may never have a “long-lasting” recovery. The unnamed author writes, in part:
“The bust has been correspondingly brutal. Those who bought near the top were left with one of the world’s worst-performing assets. Cryptocurrency startups fired employees; banks shelved their products. On March 14th the CBOE said it would soon stop offering Bitcoin futures.”
He or she neglects to mention that Bitcoin has previously been one of the best performing assets as well. An interesting point to make: Bitcoin over the past three years has been the best and worst performing asset to hold. Those who called the bubble and jumped ship at the top have laughed all the way to the bank, while long-term philosophical hodlers remain unfazed.
The article makes a legitimate argument that mass adoption of Bitcoin may never be forthcoming. If we view Bitcoin as a “currency,” intended for making payments of all sizes, the technology to do so hasn’t arrived yet. Bitcoin Core supporters believe expanding block size is unreasonably burdensome on miners and full nodes, while Bitcoin Cash supporters point out that even Lightning Network may not be best suited for making micro-payments.
The Economist speaks to the nature of Bitcoin’s actual transaction volume and notes a recent falsified report about the amount of value actually processed by the Bitcoin blockchain in 2018.
Allegedly, an absurd group of Bitcoin fanatics claimed $3.3 trillion – a figure which included “change” transactions. When you send a Bitcoin transaction, your change is returned to an address you control. You didn’t actually send any money, but allegedly people at Satoshi Capital Research decided to include change transactions in their estimation.
(CCN.com couldn’t locate the research report in question, nor did the Economist decide to link it.)
Ridiculous as that may be, the actual volume was admirable: over $800 billion.
The nature of that transaction volume puts a damper on celebrations, however. Only a little under $2.5 billion of that sum was used to buy anything. This estimation is made by a representative of Chainalysis, who bases the figure on the amount that went to payment processors.
It doesn’t take long for the article to become laughable, though. The author writes:
“Moreover, Bitcoin is designed such that only 21m Bitcoins will ever be created, making it inherently deflationary. Mining, essentially a self-adjusting lottery in which participants compete to buy tickets, is energy-hungry. At the height of the boom it was thought to consume as much electricity as Ireland (these days, it merely consumes as much as Romania).”
He or she also criticizes the immutable nature of Bitcoin transactions and says this is only good for con artists and criminals. Immutable transactions are actually a feature, not a bug if you ask most cryptonaughts. Proper security is necessary to use any form of digital money, even online banking. If you want to control your financial future, owning your money – instead of keeping it in the custody of some banker you barely know – is vital.
The article only discusses Bitcoin, of course.
Yet, it takes a serious level of closed-mindedness to believe that Bitcoin is the only possible winner in the cryptocurrency race. Bitcoin, born on 3rd base, has a long lead in every aspect of the market except a crucial one: usefulness.
Ethereum and other smart contract platforms continue to grow exponentially as increasingly interesting decentralized applications are built on them. The question of what the top cryptocurrency will be in 20 years is an open one, whether certain groups want to admit it or not.
The article concludes:
“But boosters are trying their best. They have taken to referring to the post-bust period as a “crypto winter”. The intended analogy is with artificial intelligence: the “AI winters” were funding crunches in the 1970s and 1980s after hype outstripped reality. The implication is that, one day, summer will return.”
It’s true. In this realm, we understand that a return of summer is inevitable.
The winners and losers in that period may not be who they were before. Bitcoin maximalism is not only obnoxious, it’s intellectually dishonest and disregards everything we know about disruption in the technology sector. “MySpace/Yahoo!/AOL forever” is a logical antecedent of this ideology.
From this author’s perspective, Bitcoin’s most likely role in the life of cryptocurrency is a maximal application of its liquidity and value storage features. Let fees get higher and higher on Bitcoin – it would improve its usefulness in this regard, as spending it on trivial things would become less and less attractive, while its proposition as a “store of value” would get a boost.
Things like Liquid Network try to mirror the limitless potential of platforms like Tron, EOS, or Ethereum. Sorry, but no matter what you do, speculating and hodling Bitcoin is still its most attractive use case.
But summer will return. Winter is never forever, and we’ve seen much worse than this before. If things get worse than they are today, the sector gets a new opportunity to re-consolidate on philosophical lines. You’re either in or you’re out, and the stakes are only as high as you want them to be.
Disclaimer: The views expressed in this article belong to the author alone and should not be attributed to CCN.com.