The Bitcoin Question on Everyone’s Mind

By Motti Peer, CEO of ReBlonde

Will Bitcoin Rise Again?

Bitcoin maximalists who have been through the ups and downs of the crypto market since the beginning have a simple answer when asked about their crypto portfolio. Usually this is some variation of the following: “Now is the time to buy, because in the next few years bitcoin will exceed the market capitalization of gold and hit $1 million.”

There is some truth in this feeling. After bitcoin’s 2017 bull run peak near $20,000, the world’s largest cryptocurrency fell to a low of $3,600 at the start of the COVID-19 pandemic. This crash, dubbed “Black Thursday,” mimicked the stock market crash of the time, challenging the argument that cryptocurrency and especially Bitcoin operate independently of traditional financial markets. Less than a year later, the world’s first cryptocurrency hit an all-time high above $68,500.

Bitcoin turned out to be the comeback of technology.

But things are different this time. On the one hand, the US Federal Reserve announced in June that it would raise interest rates within a range of 1.5% to 1.75%, the biggest rate hike since the 1990s. certainly didn’t put the nail in the coffin of Bitcoin, which has remained in the $19,000-$21,000 range ever since. Nonetheless, this will have longer-term implications for the market as institutions shed their riskiest assets.

Bitcoin may seem like a safe investment in crypto circles, especially compared to other newer cryptocurrencies. But if tech stocks are seen as risky, we can certainly expect traditional institutions to reduce or even remove bitcoin from their balance sheets in the coming months.

The other elephant in the market is the increasing amount of energy needed to mine new Bitcoin. Everyone who loves and appreciates crypto understands the brilliance behind Bitcoin’s halving events, which halve the reward for miners every four years and theoretically increase the price. As the real dollar value per bitcoin rose, what were once laptop miners became mining pools, leading to a computer arms race among miners. This arms race will continue to escalate, especially after the next halving event in 2024, making bitcoin production increasingly harmful to the environment.

A 2021 Columbia Climate School report commented on a University of Cambridge analysis of the energy required to mine bitcoin, noting that bitcoin mining consumes “more than all of Argentina consumes, or more than the consumption of Google, Apple, Facebook and Microsoft combined”. Of course, crypto enthusiasts love to counter the fact that the global financial system requires a lot more energy than that. Yet, given that bitcoin’s energy footprint is expected to grow, the question that follows is whether it’s worth the climate cost.

Bitcoin has not yet proven to be an inflation hedge, consistent with the argument that the currency should be considered “digital gold”. It is also not widely used as currency, as was originally intended.

Additionally, other more environmentally friendly blockchains that are also faster and in many ways more modern, such as Cardano and Algorand, have been launched since the publication of the Bitcoin whitepaper. Even blockchain gaming platforms are starting to be environmentally conscious – the Virtually Human Studio-backed NFT game Anomura, for example, will give players the opportunity to contribute their in-game rewards to restoring kelp to southern California and planting mangrove forests in Indonesia. The question here, then, is not whether crypto as an industry is environmentally sustainable, but whether Bitcoin, an in many respects obsolete blockchain that is slow to update, is.

And let’s expand this question for a moment beyond just environmental concerns, because it actually applies to every other aspect of blockchain that needs a quick update. When you have even younger blockchains than Ethereum, Polkadot and Cardano, like Partisia Blockchain, offering interoperability and unlimited transaction bandwidth, with each new shard adding 1,000 transactions per second, which Bitcoin offers that newer blockchains don’t don’t offer?

The only answer at this point beyond first-mover advantage seems to be true decentralization. This is a great answer given that the purpose of blockchain has always been to decentralize finance, and every other crypto startup worth mentioning is run by a clearly identifiable executive. As things stand, it’s hard to imagine any other cryptocurrency overtaking Bitcoin’s market share based solely on this fact. But the only way the price of bitcoin can reach its previous all-time high, or even surpass it to cross the $100,000 mark, as countless analysts have predicted, is to attract new investors.

Most of these investors will not be convinced by decentralization alone. Until someone finds a viable use case for bitcoin that will lead to mass adoption, rather than just massive investment, there’s no reason for it to happen the way we are. all wish.

About the Author: Motti Peer is the CEO of ReBlonde, a Tel Aviv-based global PR firm with an award-winning team that represents clients across the spectrum of tech, from AI and medtech to crypto, fintech, blockchain and venture capital.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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