Hello,
Wonderful article. I own a little BTC and ETH, but my real investments are in blockchain overall, so there's some places I agree with you and others I do not. I wanted to attempt to (thoughtfully) respond to your points, if nothing else but to play devil’s advocate.
First, I absolutely agree that as of late many people have been using BTC like a ponzi, the speculation and complete abandonment of rational thought, treating it like a religion, etc. To put it bluntly, crypto can sometimes feel like a vacuum for the mentally deranged. It's funny, though, while I must admit there are similarities to the tulip mania, there are even more to the gold rush, which is what sensible Bitcoin proponents compare Bitcoin to the most.
1. It’s already old technology
I tend to agree with your points here, perhaps I am a bit more on the fence, though. With regard to Bitcoin, it does have a vast distributed network, and while points can be made for or against it, so too can they be made against proof of stake, and Bitcoin's advantage is the sheer amount of people enforcing its value combined with how battle-tested it has become. I hold some of my largest positions in PoS cryptos, but this is largely because I am a speculator and am not really looking to invest in a time-tested store of value. I think Gold still wins in that category, but Bitcoin is becoming very attractive to those willing to take on the additional risk (yes, speculators too), because it is growing rapidly and, despite volatility, it has been "up only" for more than a decade now.
As for Ethereum, I totally agree with you. It remains to be seen, and with their history of delays and issues it is concerning, to say the least. Of course I don't think this opinion is in line with the title of the article, which you seem to have made just to gas light people and get the emotional responses you ended up taking for your follow up.
2. People are realizing crypto isn’t a hedge against inflation
I also saw in your follow up article mentions of people comparing BTC speculation to stock market speculation. I think a better comparison is to Forex markets. Government backed FIAT is just as faith based as gold or Bitcoin, and there is a strong inverse correlation with faith in centralization, not necessarily inflation in and of itself. To be brutally honest, that whole article looks like a confirmation bias, I feel a more honest approach is to respond directly to the "intellectual gems" you mentioned at the beginning of that one.
As a side note on this point, also consider the fact that, because there are so many "bag holders" of Bitcoin (and always will be) with their financial well-being attached to it, it adds to its ability to be a store of value.
3. It’s expensive
Yes, this is why Bitcoin cannot be used as money, and why the narrative has shifted to a store of value. The comparison here is that it's still better than Gold in this regard, and it has held up just fine compared to FIAT. Yes, you can claim that comparing BTC to gold supports your point, but it does not support Bitcoin being dead; far from it.
On another note, it remains to be seen whether this will be a problem for BTC in the future. Part of why Gold has worked so well as a store of value is surely because it is so hard to move, perhaps a currency that is too liquid cannot be a store of value, perhaps BTC is actually too liquid, or perhaps it is too illiquid compared to a superior PoS cryptocurrency with no fees and a fixed supply. This is a new technology and asset class, everything is speculation at this point in history, even precious metals.
Again, for ETH you hit the nail on the head. They are in a race against the clock to execute on their 2.0 plans before a competitor overtakes them for good. Layer 2's like Polygon and Optimism are helping them in that area, though, which is why the battle rages on.
4. The bigs will do what they always do
I'm not sure how to respond to this one. The article you linked seems to debunk your claims. Though, I do agree that (unregulated) FREE market capitalism always end in monopoly, kind of hard to disagree. I'm not saying definitively whether this applies to crypto or not, but I highly recommend you factor in the fact that cryptocurrencies are programmed money, i.e. centralization (monopoly) regulations are literally built in. Some do a better job than others.
With regard to Elon Musk, I believe this is a symptom of the space being so small compared to other financial markets - it's very easy for a singular figure to move the markets, whales too. As the market and understanding of sectors like DeFi grow, it's inevitable to see alts losing correlation with BTC, and for the impact of singular whales to diminish.
5. It’s horrible for the environment
Agree with most points here. Again, I would just be a bit more forward looking and consider that BTC over time will inevitably transition to renewables and may even become a champion of the movement to renewables as it dampens the demand for gold mining and the traditional banking system. This is a do or die point where people whose financial well-being is tied to Bitcoin, so for the first time in this response, I have no doubts about this one.
6. Governments will increase regulation and taxation
Yes, and this is already happening to an extent. It's becoming increasingly difficult to trade Bitcoin or crypto derivatives in the US or UK, and many other countries. However, regulatory clarity, even of the negative sort, is better than regulatory uncertainty. Uncertainty is what hurts markets the most, and there is an abundance of it in cryptocurrency.
Also very true, however, there are many competing countries on this planet, and harkening back to your own point about profit margins, governments the most friendly to crypto will adopt the most new citizens and accrue the most revenues. I see no reason this doesn't become an "adapt or die" scenario for all the currently established financial powers of the world.
7. Altcoins will continue to eat market share
Absolutely agree (except what the hell, NXS? Is that a shill? Talk about speculation!). Though there are plenty out there who are not just looking to make a buck, who really do believe in the long term vision of cryptos. I can easily make the case for BTC's market cap increasing while it's dominance decreases. When Gold's market cap is 10 trillion -- what is the market cap of the entire financial services industry?
8. More countries will ban BTC and ETH
See my response to 6b.
In summary, I do not believe BTC, ETH or crypto is a tulip mania. I certainly believe it is a gold rush. While it will bubble and pop as it grows, it will always end up making higher lows, and higher highs. And that doesn't only refer to price. And that doesn't mean BTC (or ETH) are dead if they are not #1.
