Haven't you heard? Bitcoin is dead. Actually, it's not even close to being dead, but what's weird is that if you only read mainstream news articles, you might be tempted to think it is. The truth is that after 13 years of expert opinions and credentialed voices claiming that bitcoin doesn't work, can't work, and won't work… somehow, blocks keep getting mined and transactions keep getting processed. Despite what high profile critics have said over the years, bitcoin is not dead, and in fact, is doing quite well.
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Bitcoin Axiom
The number of bitcoin obituaries has sharply increased since we dumped from $69k all the way down to below $20k in just a matter of months. The nocoiners are doing victory laps, and there isn't much we can do about it except to pay attention to what really matters.
Is Bitcoin Getting “Less Dead”?
There are many different ways to measure bitcoin's success or failure. I guess each of us chooses to see what we want to see. A salty nocoiner looking at a price drop sees it as proof of failure because they imagine that the only reason to buy bitcoin would be to get rich quick. When you see bitcoin from a different angle, as new money, it's possible to see that bitcoin is still winning, despite the decline in price.
One such metric is to look at how many wallets are holding small amounts of bitcoin, and the number of wallets holding 0.1 bitcoin or more has increased to an all-time high as of July 2022.
This is an interesting metric to look at because 0.1 bitcoin represents a decent amount of money that a middle class person in a Western nation might be able to save. At this time, 0.1 bitcoin is worth about $2,000 USD, and just a few months ago it was worth about $6,000.
Wallets containing less than that could represent “just a few bucks” to the average person in a Western nation, test wallets, and other irrelevant data. What we're looking at here is people taking bitcoin seriously and allocating a significant portion of their savings to BTC.
Of course, I don't mean to shame anyone who owns less than that. The point of making a note of this amount is to look at data that represents a growth in bitcoin adoption.
Actually, when we look at the growth of those who own 1.0 bitcoin, it's also at an all-time high.
With bitcoin, a single entity can own multiple wallets and a single wallet can be made up of multiple UTXOs. There will always be whales with thousands of bitcoin that may divide up their coins, but it's more likely that they have split up, say, 1,000 BTC into 10 wallets of 100 BTC each, rather than 1,000 wallets of 1 BTC each, so I don't think whale holdings will skew this data.
What this says to me is that more people are saving in bitcoin.
Another interesting metric to look at is lightning adoption. The most popular way to measure this is with network capacity, which reached an all-time high of 4,000 BTC as of the end of June 2022. This means more people are opening lightning channels and using their bitcoin for fast, near-free payments, including micropayments.
With both of these metrics, we can see that even though the price of bitcoin is down, bitcoin as savings technology AND bitcoin as payments technology is stronger than at any time in the past.
Just anecdotally, I would also point to the number of bitcoin companies being launched as an indicator of entrepreneurial interest in the technology, but I don't know if there's any data available about bitcoin companies specifically that isn't mixed up with blockchain and crypto stuff. With the failure of Web3, The Metaverse, and DeFi imminent, it's unclear to me how the future will unfold with that all that stuff.
Top 4 Bitcoin Death FUD
1. Miner Death Spiral
One bit of FUD that does the rounds every down-cycle is the “miner death spiral, which supposedly is the death knell for bitcoin. Basically, the theory is that if the price declines too much, and stays depressed for too long, miners will be forced to sell their bitcoin holdings, further driving down the price. As more people sell due to miner capitulation, the price goes down further, forcing miners to turn off the next round of unprofitable machines, thus reducing network security.
The cycle of price declines, miner selling, and trader liquidations would then represent a serious security issue for the network, which would then be vulnerable to attack, resulting in a loss in confidence in bitcoin, and eventually total capitulation of everyone in the network, possibly after an attack.
What Miner Death Spiral FUD perpetrators seem to be unaware of is the difficulty adjustment and the miner incentives.
First off, there's the difficulty adjustment. When miners turn off their machines, there are fewer competitors for coins, and it becomes “easier” to mine for bitcoin. This means those individuals or companies who have a solid balance sheet and can weather the storm will be able to mine more coins, despite the depressed price.
Eventually, the market finds a new equilibrium of who can mine bitcoin profitably, regardless of the number of ASICs actively mining.
It's true, that more miners mean more network security, so fewer miners mean less network security. Fewer miners mean that the network is actually more vulnerable to a 51% attack, which could roll back the blockchain to “double spend” bitcoin.
However, FUDders forget that attackers would first have to acquire ASICs in order to attack bitcoin. That means they must buy machines, acquire electricity, and orchestrate an attack.
I guess that would be possible, but then, what would be the point? Why would you spend tens of millions of dollars to set up a large mining facility to attack the network, when you could just start fairly competing and selling bitcoin for a profit?
2. The Government Will Just Ban It
I've written an article about why I don't think the government will ban bitcoin, but the main points I covered were these:
- Bitcoin has grassroots adoption across the world
- Bitcoin has a history of being legal
- Bitcoin companies employ people (who vote)
- Bitcoin is cutting edge fintech
- Code is speech
- Bitcoin creates wealth
In a nutshell, a government is not an overlord. A government is made up of representatives of the people, and if the people want to use bitcoin because it improves their lives, it will remain legal. In order for something to become illegal, after having been legal for a decade, there needs to be some irrefutable proof that it's causing harm to society.
There are plenty of negative headlines about bitcoin, but when you dig into the details, there's always another side to consider. The debate may go to the highest courts in our nations one day, but most of us aren't going to wake up one day to the news that it's now illegal to own bitcoin.
What's more, even if a single nation did declare bitcoin illegal (most places have not done this, even authoritarian regimes), then they would be alone. The largest and most ideologically aligned countries in the world can't even agree on how to deal with Russian military aggression or climate change, so how are they going to agree on how to ban a communication protocol? How are they going to ban digital money?
What happened when Nigeria, India, Iran, and China previously tried to ban bitcoin trading, mining, or ownership, is that the rest of the world basically moved on, and eventually they came around to removing the ban as they realized they were missing out on tax revenue.
That isn't to say that there won't be some crazy regulations, like they are trying in the EU with “unhosted wallets“, but that's not an outright ban. It's just a roadblock slowing things down.
3. It's The Myspace of Crypto
This is the hardest one to disprove because everyone around during MySpace years remembers how popular it was, and how fast it disappeared as Facebook emerged. What's to stop bitcoin from a similar fate?
I've written about Bitcoin VS Myspace before, but here are the main points:
- it's easier to switch social media than it is to switch money
- no crypto asset even comes close to the bitcoin network reliability
- bitcoin wasn't even the first attempt at a cryptocurrency
The point is that bitcoin actually works right now. People use it to store value and exchange it for goods and services. It's miles ahead of anything else out there right now. This means that to supersede bitcoin in adoption, another cryptocurrency has to offer much greater security, much great acceptability, and much great reliability to even begin to make headway.
The security thing is big. If your coin is centrally controlled by an organization, then it's painfully obvious that you can't rely on your coin being the same thing tomorrow as it is today. Without distribution of control, you're left to the whims of the decision of a centralized authority. That's not Bitcoin.
There have been about three price cycles that included altcoins, with price peaks during 2013, 2017, and 2021. There hasn't been a single altcoin that has reached an all-time high for more than one cycle when priced in bitcoin. What that means is that an altcoin may pump for one cycle, but then it's done, and it trends towards zero afterward (when measured in BTC).
Sure, if you listen to evangelists on Twitter, you may see someone shilling their bags for this or that coin that is going to be “the next bitcoin”, but if you look at the reality of what's going on, it's the altcoins that disappear each cycle.
My Favorite Bitcoin Obituary Headlines
One of the best places to visually see how many times bitcoin had died over the past decade is at bitcoinisdead.org, which maps out bitcoin obituaries over time. Some interesting observations I had are that you can see clusters of obituaries when the price dumps and when the price goes parabolic, but for the past two or so years we've seen way fewer obituaries than pre-2018 era.
Is this a signal of bitcoin's gradual acceptance? Is bitcoin getting less dead?
Here are a few of my favorite headlines from over the years.
- The Bitcoin Is Dying. Whatever. [link]
- Bitcoin Is Evil [link]
- Bitcoin Will Bite The Dust [link]
- Bitcoin Is Getting Annihilated [link]
- Why Apple Pay And Dollar Are Killing Bitcoin [link]
- I Broke Bitcoin [link]
- The Decline Of Bitcoin Shows You Can't Engineer Past Government [link]
- Performing an Autopsy On The Bitcoin [link]
- Why Ethereum Succeeded Where Bitcoin Failed [link]
- Nobody Will Be Using Bitcoin In 5-10 Years [link]
- All This Bitcoin Stuff Is Fake [link]
- Bitcoin Is A Fraud, Wolf Of Wall Street Jordan Belfort Proclaims [link]
- Bitcoin Is Dead. It Was Split In Two. [link]
- A Nobel Prize-Winning Economist Says Bitcoin Is A More Obvious Bubble Than Housing Was [link]
- Bitcoin Mania Has Clear Parallels To The Spread Of Infectious Diseases According To Barclays [link]
- Bitcoin’s Energy Use Got Studied, And You Libertarian Nerds Look Even Worse Than Usual [link]
- I Know Who's The Guy Behind Bitcoin And When That Comes Out Bitcoin Is Going To Zero [link]
I think one of my favorite realizations going through these articles is that the declarations of bitcoin's demise get more colorful and lengthier over time. In 2013, it was sufficient to say it was a Ponzi or that it was going to zero. Now, the haters really have to dress up the headline to get your attention. Bitcoin is an environmental disaster that's going to cause your wife to divorce you while your house burns to the ground because of climate change and you're still just a stupid basement dweller who doesn't even have a degree in economics.
I expect that in 10-20 years bitcoin obituary headlines will be at least a full paragraph and you'll need a thesaurus to get through them.
Final Thoughts
The thing that gets me about these folks writing bitcoin obituaries is that their criticisms are rarely smart, and never original. There are reasons why bitcoin might not succeed. Bitcoin as a global money is not inevitable. There are plenty of headwinds it will face in the future. It's absolutely not ready for global adoption in 2022.
But saying nonsensical shit like “the price is too high” or “it's a bubble” just makes it obvious that you haven't done your homework.
The smartest criticisms of bitcoin come from long-time bitcoiners who are able to witness its shortcomings first hand. What I think is interesting is that they often are able to offer an array of potential solutions, instead of declaring the problem “unsolvable” and the bitcoin project dead. A common refrain I hear is that with enough time and brainpower dedicated to the problem, it's solvable.
It's really quite rare to find someone who has a deep understanding of how bitcoin works and why it's important, yet still is unable to believe it can succeed. And even those guys probably hold a little bitcoin, just in case.
These days, most of what I see is bitcoin obituaries created as clickbait to create engagement on social media for ad revenue. If you're worried about the future of bitcoin, read what bitcoiners are worried about, because the nocoiners are out of the loop.
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