Sirwin
Sirwin

Is Bitcoin Maximalism Winning?

By paragism | paragism | 6 Jan 2021


Bitcoin extended its record-breaking rally and surged past $34,000 some days back. The new year brought a new ATH for Bitcoin. While a section of mainstream media is still calling Bitcoin a ‘punt’, the corporate money is flowing into the young asset abnormally. This bull run is quite different from the 2017 bull run. The demand for Bitcoin is growing due to its perceived inflation-hedging quality. Gold has a cult safe-haven asset status but Bitcoin has become the best performing asset class outperforming gold, bonds and stocks. The widespread pandemic led to job losses and economic disaster throughout the world. Yes, the crisis isn’t over yet and the effect of coronavirus will be long lasting on the global economy. People are losing faith in their national currencies and the fiat money printing spree is enhancing the distrust level. The stock market is booming due to the stimulus but the stream of the investment basically originates from the unprecedented money creation rate by the central banks. There is no doubt that it isn’t a sustainable practice and the gigantic financial bubble can burst any day.

Satoshi Nakamoto’s distrust towards the government and the central banks was the reason for the creation of Bitcoin. Satoshi wanted to create a trustless currency and the architecture of Bitcoin was really radical due to this. Bitcoin gained success quickly and it motivated an ecosystem of several other cryptocurrencies to grow. Almost every altcoin came highlighting its advantage over Bitcoin and some received moderate success. Bitcoin was envisioned as peer-to-peer money but Ethereum changed the game with its narrative to build decentralized applications. 2017 was a real ‘Altseason’ when altcoin market demand flourished. In the month of December 2017, Bitcoin dominance fell below 45% and sustained at that range till June 2018. Bitcoin started to gain strength as per marketcap dominance from H2 of 2018. The dominance of Bitcoin was also attributed by the weakness of ETH and XRP, the number two and number three cryptocurrency as per marketcap. Since that period Bitcoin’s marketcap dominance is climbing only. 2020 was the year when Bitcoin made only newer highs. Presently Bitcoin dominance is above 70%. Historically alts really outperformed Bitcoin when Bitcoin hit 60% dominance as the market went through different cycles but this time the situation seems to be different. December-January months had always traditionally been good for ETH but ETH/BTC pair isn’t showing any signal of breakout although ETH has grown substantially against USD. A not so very strong ETH is definitely bad for the alts and they are really bleeding against BTC. Bitcoin is finding a new ATH every week but major altcoins are far below their 2017 highs. Yes, there are occasional sparks for the alts against BTC but those aren’t sustaining. Altseason may not arrive very soon as people are buying Bitcoin at the expense of altcoin.

 

 

Bitcoin market dominance all time from Tradingview

 

“Bitcoin [maximalists] envision an endgame where an implementation of Bitcoin will be a massively adopted cryptocurrency that is both a store of value and a medium of exchange.” - Evan Wagner, co-founder of Counterparty

Notable top 100 projects have become dead in recent years. BitConnect, BitcoinDark, Lykke, FairCoin, Bitdeal etc. used to enjoy very high marketcap some years back and today they all have almost vanished. High exposure to altcoins often propels an investor to the potential risks. It is really not wrong to launch ‘yet another coin’ as Bitcoin’s success can’t remain symbolic only and it is bound to have far fetched economic implications on the market dynamics. Bitcoin maximalists have always maintained the stance that everything should be built on Bitcoin as that was the only correct way. The altcoins have been tagged as ‘shitcoins’ generally by them. One big argument for the Bitcoin maximalists is the ‘network effect’. Once you built everything around Bitcoin, it increases the value of Bitcoin. Internet can be an example of the network effect. Initially, there were only a few users and it didn’t have much value but the high influx of users increased its value immensely. Bitcoin can’t be very scalable in the base layer, so the Bitcoin maximalists want sidechain scaling solutions. It is definitely not suitable to use Bitcoin for micropayments and that was the reason, Bitcoin Cash supporters forked Bitcoin claiming that the original vision of Bitcoin was to support day to day payment. Satoshi was really very clear about what he wanted to create. In this bitcointalk post, he publicly stated that “Bitcoin isn’t currently practical for very small micropayments.  Not for things like pay per search or per page view without an aggregating mechanism, not things needing to pay less than 0.01.  The dust spam limit is a first try at intentionally trying to prevent overly small micropayments like that.” Most probably Satoshi didn’t want to compromise with the security of the base layer. So, he didn’t try to create a perfect blockchain. Optimization can always be done through different scaling solutions down the line.

The traditional whales are baffled by the entry of new corporate entities and hedge funds which are pumping money into Bitcoin. There is a corporate race to convert corporate cash reserve to Bitcoin now. OTC deals of several big exchanges are drying up market circulation and Bitcoin’s store-of-value is getting stronger. The governments across majority nations have taken neutral stands towards Bitcoin now and FUD is comparatively lesser than previous times. It signals that the market is maturing. More and more people are understanding the magnitude of Bitcoin and its impact on humanity. Numerous cryptocurrencies often create a ‘problem of plenty’. Yes, the market potential is too big and many alts will get enough headroom to grow but growth must be supported with enough innovative and logical use cases. For example, Ethereum has become the preferred value settlement layer of the crypto world whereas maximum value still remains on Bitcoin. DeFi is obviously a game-changer concept. We need decentralized applications; so we need the blockchains like Ethereum, EOS, Polkadot etc. But how many? Who will use so many forked yield farming platforms down the line when the abnormal yield bubble will burst? Market consolidation is bound to happen. Rotation into ‘majors’ is a common phenomenon in the financial market where the major financial tools suck money from the others. Bitcoin maximalism is winning as of now and this is a significant milestone on the evolution path of cryptocurrency.

Note: This post was first published here for Cryptowriter in association with voice.com.

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paragism
paragism

Cypherpunk. Writing content which I love. Creeping on the blockchain. Twitter - @paragism_


paragism
paragism

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