I was recently reminded of something which I already knew.
Chances are that you know it too.
But like Satoshi’s legendary whitepaper, it’s worth being reminded of over and over again.
I recently encountered a cryptocurrency fan on social media. Like most crypto fans, he (yes, I assumed his gender – oh no the world is going to collapse!) was rather passionate about a particular crypto. I have a problem with his crypto views, not because of the coin he likes, but because of his other beliefs.
To be clear: I am the one who has a problem with what he thinks, but it’s not me who has a problem, it’s him.
You know me by now: I want to HELP people in crypto. This blog post is not to berate someone or to try to take a dig them. For that reason I won’t be posting any screenshots of the discussion we had, I won’t mention his name or even his coin of choice. It doesn’t matter, none of that is relevant to this discussion.
The purpose of this post is to hopefully help prevent you from repeating his mistake.
The mistake that this young man makes is to believe that his coin is better than Bitcoin.
He believes that Bitcoin is in various forms of trouble and that his coin will eventually surpass it in terms of market cap and popularity. He believes that his coin is the only cryptocurrency worth holding and that Bitcoin is a bad investment.
He’s not alone in his beliefs. You’ve probably encountered coin fanatics before; people so absolutely focussed on their particular coin of choice that they become blind to its faults and hopelessly over-optimistic about what their coin may achieve. It’s a classical example of a confirmation bias – I LOATHE biases for good reason! Like most confirmation biases, coin-specific biases grow worse over time. The more time an individual spends communicating with the community of a coin, the more the community members reinforce one another’s beliefs in their echo chambers.
Worse still: in some cases (such as this one) the devotion to a coin becomes so strong that the coin fanatics turn on Bitcoin itself, slating it as outmoded tech on a path to destruction. And that is where they are mistaken.
The mistake that causes the mistake
You need to appreciate that Bitcoin is the original cryptocurrency. It has its faults. Compared to modern coins, it is archaic in design, slow and lacking in features. It’s unglamorous and possible “uncool”, especially to younger or newer crypto investors.
If you place BTC side by side with a newer cryptocurrency, the comparison of technical capabilities and limitations does not appear to be in Bitcoin’s favour!
It is here that the error in appreciating value and future popularity occurs. The argument goes something like this:
My coin is better than Bitcoin! It can handle 1000x more TPS! It has DApps and Smart Contracts running on it! It can encrypt wallet addresses and transaction amounts! It uses a consensus algorithm which doesn’t require huge energy expenditure! It’s used by Yield Farms X, Y and Z! Since Bitcoin can’t do any of that, my coin is going to surpass Bitcoin! Bitcoin is going to die off because it is slow and expensive and can’t handle all the transactions required of it.
Why the mistake is a mistake
Their mistake is a simple one, as well as being a logical fallacy of note: they’re judging a fish by its ability to climb a tree.
They’ve set a benchmark based on what their coin can do, and then judged Bitcoin by its failure to perform those functions.
It would be far more accurate (though also not entirely correct) to judge their coin by Bitcoin’s benchmark.
Does your coin have as many active users as Bitcoin does? It is accepted on as many exchanges? Does it have as many trading pairs? Has it existed for 12 years? How much would you have to spend to conduct a 51% attack on it?
That would give you a very different picture and the opposite outcome, wouldn’t it?
But the CORRECT approach to take – as always – is to be OBJECTIVE in your assessment.
And in order to do that, you have to look beyond technical – you have to look at FUNDAMENTALS!
Ask Coca-Cola what happens when you introduce a new and better product, pitting it against a stalwart. Spoiler alert: it doesn’t end well for the new guy!
Bitcoin IS King!
The reasons why Bitcoin will not be knocked off its perch – at least not any time in the foreseeable future – are myriad in number.
As with the Coca-Cola example, you could make a strong case on human psychology alone. Even the fiat currency mob know: something has value because people believe that it has value. Bitcoin has numerous believers. The belief of Bitcoin adopters tends to be strong, because those who understand Bitcoin understand why it is so good as a currency. The belief in Bitcoin is growing, active users are ever increasing in number. Financial institutions and businesses are starting to incorporate it into their products and businesses. Retail investors like me are willing to keep on purchasing it at ever increasing prices. Short of an cataclysmic failure, belief in Bitcoin is not going anywhere soon, it’s only going to grow. And don’t let the “cataclysmic failure” talk scare you – that’s just me covering all bases. Cataclysmic failures could happen to anything.
I’ve said it before and I’ll say it again: Bitcoin is a Store of Value.
I do not foresee Bitcoin ever being used as fiat currencies are today. Perhaps the Lighting Network will prove me wrong, but I see other cryptocurrencies fulfilling the Means of Exchange role of money. You want to store wealth and grow it? Fine, use Bitcoin. You want to transact rapidly and cheaply? Also fine, but don’t use Bitcoin, use Litecoin, Dash, Nano etc.
I’ll say this again too: cryptocurrencies should be seen as complimentary to one another.
No single coin is going to capture the entire crypto market! The market has too many facets. Remember: if crypto is to succeed fully, then it will not only replace fiat money, it will also replace entire businesses, process chains, accounting practises, logistic chains, money lending, business record-keeping etc. That is going to require MANY coins, each doing their little bit and fulfilling their role in the global economy.
But when you’re looking for that one coin which is going to store value for you, that coin which is the digital equivalent of gold, the most trusted coin, the most secure coin, the most popular coin, then chances are that Bitcoin will always be the coin you are looking for. The odds of that changing within out lifetimes are not good.
It does not matter if Bitcoin is not capable of 10000 TPS or zero-fee transactions, or of acting as the backbone for crypto gambling DApps, it doesn’t need to be able to do those things!
BITCOIN CAN DO EXACTLY WHAT IT IS REQUIRED TO DO!
- It can store value
- Relatively cheaply
- And securely
- It can hedge against fiat-based market crashes
- It’s inflation immune
- It’s borderless
- It’s anonymous
- It’s network is reliable
- It’s verifiable by anyone
- It’s immutability affords it fraud immunity
- Governments and banks can’t seize it unless you allow them to
Why more do you require of a store of value?
In terms of a “Gold Standard”, I put it to you Bitcoin is significantly better than Gold itself!
Compared to Gold, I would fault Bitcoin only in terms of how long it has existed as a form of money. Bitcoin can’t compete there. However: Bitcoin has already survived for 12 years, despite being severely unpopular with some extremely powerful entities which it threatens to usurp! More to the point of this article: it’s the cryptocurrency which has existed for the longest. When you compare apples to apples, no other cryptocurrency can challenge Bitcoin in terms of age.
The point is that Bitcoin IS the King of the Crypto realm. It doesn’t matter if other coins can jump through hoops of fire while juggling rats. They can’t compete with Bitcoin because they are not Bitcoin! They don’t have the first mover advantage. They didn’t capture the hearts and minds of the proto crypto-anarchists prior to 2010. They haven’t earned the trust and popularity that Bitcoin has – and it’s too late for them to catch up!
You can’t start manufacturing “Super-Cola 2020” in your garage today and expect to compete with Coke just because your product tastes better and is cheaper. You’re an ant, coke is an elephant. Accept that.
There are two types of cryptocurrencies: Bitcoin and Altcoins. It is what it is.
In the wise words of fellow TIMM blogger CryptosDecrypted:
He’s not wrong.
But what about … ?
I’m not saying that Bitcoin is the be-all and end-all of crypto, and I don’t believe that CryptosDecrypted is saying that either.
I’m definitely not saying that it should be the only coin in a crypto portfolio, on the contrary, I am a strong proponent of crypto diversification. I believe that altcoins act as Bitcoin Superchargers: amplifying both its gains and losses. If you know what you’re doing, you can make a lot more money in Altcoins than in Bitcoin. Similarly, if you don’t know what you’re doing, or if you simply hit a run of bad luck, then you can LOSE a lot more money in Altcoins. Ask me, I know, I’ve held many Alts through both the 2017 crypto hype climb and throughout the 2018 market crash and subsequent Crypto Winter.
No, your DeFi coin is not the next Bitcoin. It’s not the “mother of all cryptos” and it’s certainly not better than Bitcoin. If Bitcoin fails today, I promise you that your DeFi coin will drop to zero along with the rest of the market. But if your DeFi coin fails today, then the Bitcoin price may shed a few dollars… and then bounce back a week from now. Bitcoin can sustain a bull run with no help from any other coin. But no coin can sustain a bull run without Bitcoin.
I’m no Bitcoin Maximalist, it’s not even my favourite coin. I hold many different cryptos. I’m openly partial to NEO (for reasons too numerous to mention here), it’s been my favourite coin since around the time of its rebrand. But not in my wildest dreams would I say that NEO is better than Bitcoin, because it isn’t.
Due to its market cap being so much larger than that of any other crypto, Bitcoin is expensive. For this reason it makes sense to invest elsewhere if you want to increase your chances of making larger crypto gains. But with the chance of greater reward comes the chance of greater risk. The lower down the market cap ladder you go, the more money you may make, but the more you may lose too!
I tell you again: if you want a STORE OF VALUE, then you can’t beat Bitcoin. Not only will it store value, but it will grow it too. Of course the longer you store it for, the more true this becomes. Short-term BTC investment can and has resulted in significant losses. As with any investment, one should learn about it in detail before jumping into it!
I know that hype in the market is exciting, I feel it too! I know that DeFi is the “big thing” that everyone is into at the moment, I hold a little YFII and Flamingo (FLM) myself. But once upon a time that hype belonged to ICOs. And Tamagotchis. And Pet Rocks. (Links supplied for Millennials and Gen-Z).
Bitcoin isn’t a Pet Rock. It’s an Amazon, a Coca-Cola, a Microsoft.
Don’t be greedy. Invest with your head, not with your heart.
Yours in crypto
All charts made by Bit Brain with TradingView
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful”
~ Bit Brain