Topic: The Bullish Case for Bitcoin, reloaded. (Read 362 times)

Bitcoin's price seems to be caught in a limbo between bull and bear market. Even if we're still 60% above the November 2022 heights, there is again some fear lurking around. I think thus, it's time to remember why Bitcoin could be a much bigger success than it currently is.

Some will know the blog article The Bullish Case for Bitcoin by Vijay Boyapati, which has been transformed into a general introductory book about Bitcoin.

I agree with many of the ideas displayed in the article, but I get the impression that the linear "adoption timeline" the author pleads for, needs an update.

Basically the author argues that Bitcoin adoption will have four stages:

1. Collectible: A thing some people like to collect, even if its value is still undetermined.
2. Store of value: An asset used to store an abstract "value", for example to invest money in it and get the same or more value/money in the future.
3. Medium of exchange: A currency used to purchase goods and services.
4. Unit of account: A currency which can be used as a base to calculate prices.

We've successfully moved away somewhat from Phase 1. But I've got the impression that Bitcoin is currently caught in an intermediate "limbo" with characteristics of the first three stages, but without progress to evolve into the fourth (unit of account) stage. Even more: it seems that people's hopes currently are linked to the store of value concept, and usage as a medium of exchange was already more popular a few years ago. And as a store of value, it's only useful considering very long timespans (>2-3 years) due to harsh volatility.

My theory is that the order for Bitcoin's "bullish case" has to be updated. For me the stages are:

1. Collectible
2. Medium of exchange
3. Store of value
4. Unit of account

Why? There are basically two reasons.

1) The first one is liquidity and demand. Bitcoin's liquidity is better than 10 years ago, but hasn't made significant progress in the last 2-3 years. This makes its market still vulnerable to panic, FOMO, manipulation and other plagues which lead to its erratic price behavior.

If Bitcoin was used more as a medium of exchange, it would have significantly higher liquidity. Because each time you buy and sell something for Bitcoin it's a market operation where you're establishing its value. Even more important: Each time somebody agrees to sell something for Bitcoin, this can be considered a buy offer in the order book.

Thus, with more usage as medium of exchange and "boosted" liquidity, Bitcoin's volatility would probably lower, and it would become a safer store of value. Imagine you wouldn't have to fear an 70-85% depreciation in a bear market cycle but only 30% in the worst case. Would you invest more in it than now?

People also seem to misunderstand the concept of "scarcity". Scarcity is not equal to "limited supply". Scarcity exists when there is more demand than supply. A limited supply helps, but it does not mean something is really scarce. Many altcoins have a more limited supply than Bitcoin but have dramatically failed. Demand is crucial. If demand is erratic and only depends on FOMO cycles, then no reliable store of value can be achieved.

While if there is an explosion of merchants and everyday people accepting Bitcoin, then this means that there's also an explosion of demand. Again: Each of these offers is an offer in an imaginary orderbook where Bitcoin is traded against "real value".

Of course if volatility lowers then the bull runs will become less steep too. But that isn't a problem because Bitcoin has anyway the potential for values largely above $100,000. And that leads us to the second issue:

2) Many people forgot why Bitcoin is such a big innovation. It is the first digital value exchange medium which lacks central intermediaries completely and thus has its known advantages like censorship resistance. All previous attempts needed some kind of "bank" controlling the system.

This is Bitcoin's USP. Bitcoin can be used by anyone, anywhere (where there is Internet access) and anytime, without the need that someone "allows" you to do so. And this characteristic is most useful for a currency, not so much for a store of value. The internet (and this forum) is full of complaints about banks having closed accounts of people and made your life a pain. Bitcoin fixes this (And no, Ethereum and other centralized coins do not really fix it, as their censorship resistances is much lower).

In my opinion, Bitcoin's big advantages all really shine when it's used as a currency. And thus long term success in the future depends if it's used as a medium of exchange or not.

Once a path to currency usage becomes clear, Bitcoin will thus become a reliable store of value. Not before - before it will be subject to the same wild swings we've seen in the past years.

I would even say: There'll be no $200,000+ ("digital gold") Bitcoin without usage as a currency.

(And if you are worried about scalability: There's LN, there's even progress with sidechains, like projects like Stacks or Nomic and rollups show. It's nothing unsolvable.)

The people that should be unaware of bearish and bullish season should be the new investors, but the investors that knows the cranium or the rudiments of cryptocurrency and mostly bitcoin should be able to detect when their is a bearish and when their is no bullish, concentrating on a bearish or bullish as investor it depends on your target and what you want to invest more in bitcoins will determine your target, so I believe a lot of investors scrutinised cryptocurrency price both increment and decrement with the graph or chart of the market to know the exact period that will be the season of bullish and bearish before investment.

The problem is that many see the 1 million or more mark as possible in a bull run or even believe Saylor dribbles about $5 million, would those spend if they think at least 100x from now on is possible in a year time? Of course not, they will keep their coins in their wallets and not spend a dime and you can't really blame them.

Agree with you but the change has happened and continues to happen in the opposite direction.

I think so but it seems that most of merchants still afraid to use btc as medium of payment because the price is still volatile. I think this problem should be fixed, what if in every transaction merchants always get money in form of fiat and cryptocurrency from the customers automatically traded in exchange? it will need certain app to do that

I hope I interpret your post right - you consider then Bitcoin has to become less volatile (above all to the upside) to boost growth based on usage? (judging from the price of the shares you mention)

So I think there is a mentality change needed in the community, as Bitcoin is not only a technology but also a social system. Of course, you can't impose such a change, that's why I wrote about incentives.

One factor indeed is that fees must be cheaper, and my best guess is that this could become possible with a combination of better LN software and sidechains/rollups to circumvent the "monkey issue".

Without usage as a currency is not something you need to worry about because it is used as a currency every single day. Maybe we do not hear about it because it is not talked about that much but online payments are shifting towards more and more bitcoin, a lot more online websites that started to accept bitcoin and that means that it is going to be possible way more.

And so what does the model say about the linear timeliness adoption of bitcoin? You never mentioned the actual timeline you just listed the bullet points of it

Yes, you're right. But bitcoin has an undeniable advantage - you can pay with bitcoin in almost any country without changing it for local currency. But still, because of the disadvantages you pointed out, bitcoin may eventually be replaced by some other cryptocurrency

What I have heard till now Bitcoin is used as a store of value. It was created to be a global currency but it has some limitations that won't let it work as a currency. Its legacy network takes a few minutes to transfer when the network is congested. Transaction fees are also high compared to fiat currencies. Just think you had to pay a 10$ transaction charge for a 20$ coffee. This doesn't make sense. Some gambling sites and few merchants accept it as a currency which doesn't make it one. When you can buy vegetables, fruits, and other daily essentials with Bitcoin it will be considered as a real currency. Till then it is a store of value for me and I am happy about that.

Is bitcoin ever in a bear market? If it goes to 10k, falls to 5k, goes to 20k, falls to 10k, goes to 60k, falls to 30k, and so on, Is there even a bear market? Someone could argue that these are simple corrections in one big bull market, since it keeps going higher, making higher highs and higher lows.
IMO there's a clear growth pattern that we're witnessing here.

I have to agree that at this moment I only see it as a store of value. There's not enough acceptance for me to be able to spend it on the things I need and I don't want to sell it on exchange, especially now when it's so undervalued.

Without usage as a currency is not something you need to worry about because it is used as a currency every single day. Maybe we do not hear about it because it is not talked about that much but online payments are shifting towards more and more bitcoin, a lot more online websites that started to accept bitcoin and that means that it is going to be possible way more.

I am just waiting for amazon and steam type of companies to get back on the ship, if they do that, even if with just stablecoins, that would be amazing. Something like CBDC could make that work, because seeing the government behind something could make them work a lot better on the long run and should be doing a great return on profit as well for those companies.

Without usage as a currency is not something you need to worry about because it is used as a currency every single day. Maybe we do not hear about it because it is not talked about that much but online payments are shifting towards more and more bitcoin, a lot more online websites that started to accept bitcoin and that means that it is going to be possible way more.

Something like CBDC could make that work,

growth based on usage will only start when the possibility of earning x2 or x5  will be the same as from holding Coca cola or Walmart shares. Till then, the coins are too precious to be spent!

And you said incentives? Which ones?
Remember that credit cards and their chargebacks are good for the consumers, but businesses hate them, Bitcoin is good for the business as there are none but consumers won't like it! Cheap fees? Oh, let's not even bring this into the discussion right now in this orc borg monkey clusterfuck!

I am agree with your status that lots of people are unaware of bear and bull market because when the price reduces 5 percent then they consider that time as a bear market but they don't remember the time when bitcoin price was 12k$ or 15k$.

It will be good if investors don't think about bull and bear market because they cannot understand it. Without considering ups and downs just focus on your profit that if investors can manage investment at a specific price then they should do and wait until it increases in value.

I think so but it seems that most of merchants still afraid to use btc as medium of payment because the price is still volatile. I think this problem should be fixed, what if in every transaction merchants always get money in form of fiat and cryptocurrency from the customers automatically traded in exchange? it will need certain app to do that. I think BTC still can reach $200k although its mostly traded in exchange site rather than being used by merchants because speculative investors always looking for opportunity to gain their money and BTC provide big opportunity for them.

Your thoughtful insight about factors those can potentially influence the future of Bitcoin's price is indeed valuable. In particular, when assessing the Bitcoin price trajectory within the historical context of halving event and its consequent impact on Bitcoin market. It is important to acknowledge the prevailing economic conditions worldwide. Factors such as, high inflation and interest rates, declining GDP across major economies, tensions among USA, Russia and China, are creating unfavorable environment for investment in risky assets. Therefor despite the historical role of halving event to act as catalyst for price surge, it is possible that substantial increase in Bitcoin price in 2024 may not materialize, what most of Bitcoin enthusiasts are expecting.

Out of twenty or thirty people I've gone on holiday this year and managed to take a glimpse at their phone when sharing stuff or videos, me and my wife were the only ones that used an adblock. Everyone who noticed this asked us how, as right now I don't know if a single one of them really installed it. Don't underestimate the difficulty of using a wallet, it might be child's play for us, but you can see for yourself in this forum alone how many crypto users still have problems with basic things like setting up fees!

Sometimes I'm becoming as fatalist as you But even if many people don't care, it can make sense to think about the reasons for Bitcoin being "stuck" at this "speculative asset stage" and how this could improve, in particular which incentives could get people to get "on track" to a more P2P cash-friendly stance again.

I don't see current (particularly mobile) wallet software as that difficult to use. However, I think you're correct that there is room for improvement particularly in the field "protect the user from him/herself". I don't know that many mobile wallets, but for example a simple function only allowing to spend a certain amount per day (as it's common in bank accounts) could help there.