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Statements like the one in the headline are frustrating for many. But if we think about it a bit more carefully, it is interesting how such statements are created at all. There are still respected investment managers who do not believe in the limits of Bitcoin (BTC). Their argumentation is that if it is so easy to fork Bitcoin indefinitely, then there is de facto no limit to the supply. For example, investment researcher and former hedge fund manager Jesse Felder wrote about Bitcoin in a Twitter post a few weeks ago:
Bitcoin believers rely entirely on the idea that Bitcoin is limited in availability, which makes it far more attractive than fiat currencies, which are printed like crazy by central bankers around the world. However, Bitcoin has already gone through a hardfork several times and multiplied the number and type of Bitcoins in circulation. If you add up all the hardforks that Bitcoin has gone through since its inception, the total number of Bitcoins has actually grown faster than the number of dollars. That is a fact.
And fields is by far not an isolated case. In the market and investment podcast The End Game, investment manager and writer Fred Hickey said this week:
The crypto currency number five is Bitcoin Cash! Number 12 of the largest is Bitcoin SV – there are no limits to these things. If Bitcoin became too expensive, they would simply go to another. These are speculators, they pile up everything that is crypto-currencies.
That the Bitcoin community is a mere accumulation of speculators is something we can confidently reject without even acknowledging this claim with a deeper answer. Much more we want to dedicate ourselves to the misguided idea that the offer of Bitcoin (BTC) can be extended at will by Hardforks. How do these gentlemen arrive at these assumptions? After all, one can certainly not deny them a certain intelligence.
While many Bitcoiners probably already roll their eyes annoyed when reading these quotations, this article will show that there is more behind it than just the lack of adequate research on the subject all around Bitcoin. So let’s go on an exciting search for answers together.
Bitcoin is unique! But why?
Most readers who have dealt with crypto currencies quickly realize that Bitcoin is unique. But have you ever really thought about why this is so?
It is only partly the technology. The block chain code is open source and can be copied and adapted to create new Bitcoin-like crypto currencies. In fact, there is already a whole range of so-called Bitcoin clones. But no matter what they call themselves, they are not Bitcoin.
Bitcoin Cash has increased the block size, which enables greater throughput at the expense of a higher degree of centralization. Bitcoin SV again increased the block size many times over. But the market clearly shows that investors prefer the original version of Bitcoin:
- Marketcap of Bitcoin: $352,529,970,499
- Bitcoin Cash Marketcap: $5,246,747,735 and
- Marketcap of Bitcoin SV: $3,332,880,979
But have you ever heard an institutional investor talk at length about how Bitcoin’s SegWit scaling solution gives them more confidence in the security of decentralization than the lush 128MB blocks of Bitcoin SV? This may have happened in isolated cases, but it is certainly not the rule. In addition, I’m probably not being too far out of line when I say that scalability is not a decisive investment criterion. It is not the Bitcoin-specific features that ensure that money flows predominantly into BTC. It is the network effects.
This is not to say that with more people holding Bitcoin, adopting BTC becomes more attractive. That is absolutely correct, but it is not meant here. I’m talking about the market infrastructure and services that are emerging around the world’s largest crypto currency: On ramps, sophisticated platforms, professional custody, complex derivatives and more importantly, liquidity.
These market network effects, combined with the characteristics and potential of the underlying technology, are the reason why professional investors are currently focusing on Bitcoin.