Delved into conversations between mainstream investors on crypto
I followed conversations in the Facebook group I mentioned yesterday and participated in them. There was a post by someone that contained a link to an article written by a Bitcoin hodler for a mainstream investment newsletter online. The article recounted all the recent positive developments that have made news recently such as major fintech companies buying bitcoin and getting into the crypto business as well as JP Morgan publicly having turned its coat as well as Paul Tudor saying positive things about crypto.
Recycled false ideas keep cropping up
The comment section revealed how many retail investors are still in the dark regarding how the macro environment has changed in favor of mainstream crypto adoption. But it's also the case that many other are seeing the light.
Naysayers had the following old recycled arguments:
- Bitcoin has no use case
- Blockchain, not Bitcoin
- Bitcoin consumes too much power (not yet, IMO)
- Investors should invest in something useful
- Bitcoin is mined in China where power generation is dirty
- Bitcoin is useless as a payment system and its only use case is speculation. Tulips!
- Bitcoin is only useful to criminals, terrorists and drug dealers
- Bitcoin is too volatile
- Bitcoin is a pyramid scheme
- Bitcoin is developed by nobody and it will come crashing down because of it
- Bitcoin is used in money laundering
Many people were saying mass adoption of Bitcoin will never happen because it is so slow and inefficient.
The gist of my responses, feel free to adopt, improve and deploy
Bitcoin as an inflation hedge and way to direct QE money at one's own way
Bitcoin has guaranteed scarcity. It is decentralized to the extent that not even a great power can shut it down. The proof-of-work algorithm is used to solve the problem of distributed consensus. The low maximum throughput has nothing to do with the value proposition of Bitcoin. Governments are unable to balance their budgets, which forces central banks to print large quantities of money. Bitcoin is used as a receptacle to grab some of the QE money being pumped out in vast quantities by central banks. Quantitative easing generates vast amounts of new money every day people who are not investors in financial assets will not see a glimpse of. Gold is hard money the same way Bitcoin is. Gold is hard money precisely because of its high stock-to-flow ratio. Bitcoin's stock-to-flow ratio doubles every four years. In the year 2024 it will become harder money than gold in that sense.
The false idea of competition between cryptocurrencies
Someone talked about the crypto space following a winner-takes-it-all logic, which I find patently false.
That's because there is no competition between cryptocurrencies. That idea is based on a misuderstanding of the nature of public blockchains. They're nothing like profit-seeking enterprises. Public blockchains are protocols. Forking is a peaceful solution to disagreements between network participants - and also a natural scaling solution. There is plenty of space for different protocols in the world.
I explained it how this year has seen the explosion of the development of cross-chain protocols and also decentralized oracle protocols. Investors have realized the massive value proposition of cross-chain communication. The boom in decentralized oracle chains and DeFi projects are examples of that. I explained how all cross-chain communication grows the internal network effect of the space and the combined value of the entire space in a non-linear fashion as Metcalfe's law would predict.
I pointed out that every public blockchain must have a native cryptocurrency because every decentralized consensus mechanism requires a native coin to function.
Conclusion
It seems that few people will ever have the opportunity to front run large financial institutions and take full advantage of the opportunities investing in Bitcoin afford when the legacy financial system is crumbling. Bitcoin is not the end all be all of crypto investing. Far from it. New opportunities are emerging so fast that it would be a full-time job to keep abreast of all of them.