Isn't it funny how we measure Bitcoin in dollars, the currency it was designed to replace?
In the Bitcoin whitepaper, Satoshi Nakamoto wrote:
A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a financial institution.
Yet here we are 15 years later, cheering on financial institutions and the SEC to approve ETFs for Bitcoin. Is it safe to assume that we are losing sight of the original goal?
The funny thing is that, while we cheer on the rise of Bitcoin's price, the dollars that we are chasing are headed for collapse.
Too much debt
The problem with the dollar can be summed up in three words: too much debt.
And in recent years, the US government debt has gone exponential. From 2010 to 2020 it expanded from $10 trillion to $22 trillion, and from 2020 to 2024 it skyrocketed from $22 trillion to $34 trillion.
This hyperbolic expansion of debt is unsustainable, especially with interest rates at 5%. The powers that be know this, and that's why they are actively pushing for a reset and the activation of CBDCs.
Several countries are aware of the dollar's plight and have begun the process of de-dollarization. While some nations have chosen to pledge allegiance to the BRICS, others are opting for cryptocurrencies instead, like El Salvador and Argentina.
Anyway you slice it, the dollar is on its way out. Therefore the current price of any cryptocurrency doesn't really matter in the long-run. All it does is cloud our judgement when it comes to envisioning the future of crypto.
We need to recognize the bias we have towards the coins and tokens in our own portfolios, especially those that have gone up in price. It can cause us to think about them emotionally, rather than logically.
For example, someone may be thrilled that their Bitcoin portfolio has skyrocketed in price thanks to ETF speculation, meanwhile the cost of doing an on-chain transaction has reached $30, essentially cutting off the vast majority of the world population from participating in Bitcoin's ecosystem.
If the economic activity of an ecosystem isn't growing, then neither should its value. However, its price can still increase, due to pure speculation.
What Makes A Cryptocurrency Valuable
If we take a step back to when Bitcoin was worth zero dollars in 2009, what would we say rationally makes a good cryptocurrency?
First of all a cryptocurrency needs to be censorship-resistant, meaning that no single party can block a transaction or suspend an account. After all, this is the groundbreaking concept that made Bitcoin so valuable in the first place.
Inflation is something that needs to be thought about carefully. Are we engineering an economic system that will expand to infinity, or expecting it to reach a limit sometime in the future?
Will it be able to scale to support millions of users? If not, will it be natively interoperable with other blockchains to take on the extra load?
Token distribution. Are there a few whales who own over 50% of the supply, or has it been spread out relatively evenly among the community members? Concentrated token supply has the potential to negatively impact governance decisions in the future.
Perhaps, above all, the most important factor to consider is if the blockchain produces economic value outside of pure fiat price speculation. For example, will it be used to trade gaming tokens/NFTs, real world assets, or incentivize the roll out of physical infrastructure?
Remember too that value is subjective. We may think that meme coins and NFTs are worthless junk, but there are an increasing number of people around the world who value them dearly, and it would be a waste of effort to fight that trend.
Conclusion
We have become so fixated on the dollar value of Bitcoin that we've almost lost sight of its original purpose, which is to eliminate middle-men from our transactions.
The price of a cryptocurrency measured in US dollars doesn't matter in the long-run, because the dollar is being phased out all around the world.
To truly increase in value, a cryptocurrency must be censorship-resistant, scale well, and facilitate economic activity. We should also carefully consider inflation to make sure the ecosystem sustainable.
If you found this article informative, check out my other articles about finance and crypto here on Hive. For more frequent updates, follow me on InLeo.
Until next time...
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