Around ten years ago, there was a conference about Bitcoin held by a guy named Antonopolous (I don't know his first name). Despite the low attendance in the almost empty hall, his enthusiasm for Bitcoin was evident in the video.
Back then, he wasn't focused on the price, and while one Bitcoin was roughly $1,000, he passionately advocated for it, presumably holding a substantial amount himself. I'd bet he still holds a significant stake and maintains unwavering faith in Bitcoin, despite its slow mass adoption.
Fast forward to 2021, and we witness the historic moment when El Salvador became the first country to adopt Bitcoin as legal currency alongside the existing dollar. Almost two years have passed since the adoption, but no other country has followed suit.
Meanwhile, in the US, there are several spot ETF filings awaiting approval, including one from BlackRock. Many traders and investors believe that BlackRock's entry into crypto will pave the way for ETF approval and result in trillions flowing into the market.
Yet, it's uncertain whether both or neither will come true. The concern lies in how ETFs operate. It's probable that we'll see more "paper Bitcoin" circulating, while "physical Bitcoin" in the hands of retail investors decreases. Bitcoin is traded on various exchanges, but how many of these trades are genuinely backed by the asset?
The question arises: If all spot buyers wanted to withdraw their Bitcoin instantly, would exchanges have enough liquidity to fulfill these withdrawals? My gut feeling is that most exchanges operate using a fractional reserve system, similar to how banks handle fiat money.
These factors make us question the true extent of Bitcoin ownership and the liquidity of the market. While adoption progresses slowly on the global stage, we must be mindful of the dynamics at play and the impact of financial institutions' involvement in shaping the cryptocurrency landscape.
Hence, it's possible that there might be more Bitcoin in circulation than the supposed 19 million that has already been mined, indicating that Bitcoin's current price is undervalued. How did this happen? The answer is quite simple: a similar phenomenon occurred as with gold-backed banknotes. People favored the convenience of paper over the physical asset.
Surprisingly, many individuals in crypto store their entire portfolios on exchanges. They find it more convenient to dump or panic sell their coins instantly rather than self-custody and use exchanges solely for their intended purpose: exchanging between currencies.
When it comes to "digital gold," it seems that some are content with leaving their wealth on exchanges. However, you'd rarely find anyone exchanging local currency into euros or dollars and leaving it all in an exchange. This mentality has significantly hindered the potential mass adoption of Bitcoin and cryptocurrencies in general.
The masses are more enthusiastic about BlackRock ETFs and leveraged trading shitcoins on Bitmex than using crypto to pay for everyday necessities like food and gas. Once programmable money becomes prevalent, many will wish that crypto had been more integrated into real-life usage rather than merely speculated upon.
Hive has shown some use case progress in this regard. HBD is already being used as an exchange currency in certain places like Cuba and Bolivia. Personally, I find the developments in El Salvador far more exciting than all the anticipation surrounding those ETFs.
Larry Fink, the CEO of BlackRock, and Michael Saylors are not saviors. What matters most to me is the practical usability of blockchain technology. What are your thoughts on this matter?
Thanks for your attention,
Adrian