(Caveat: I'm very new, in relative terms, to crypto and trading. If I'm getting something terribly wrong, I'm happy to be corrected. I also want to say that I think that Bitcoin is an amazing and revolutionary invention - but I think it's a 'draft version' of the cryptocurrencies that will eventually get mass adoption.)
Ok. So you've probably already scoffed at the idea that bitcoin could drop in the middle of this bull run. And you're probably right, at least for the next little while. 100k is likely inevitable, and if Willy Woo and others are correct, 250k+ is quite possibly happening in our near future.
But people seem to think this is endless. Is it really going to a million dollars? 10 million?
I'm going to argue no in 3 ways:
#1. I had a shower thought yesterday, regarding something that's been coming up in the media recently, and that's the environmental impact of the energy consumption of bitcoin mining. This energy is what powers the Proof Of Work security of the whole system.
The realization was this: if bitcoin's mining hashrate is linked with the price, then every time the price doubles, so does the energy usage.
Currently Bitcoin uses an estimated 106 TWh per year, equivalent to the entire nation of Kazakhstan, according to digiconomist.net. In the Trading View chatroom I witnessed someone *defending* bitcoin's energy usage by saying "it's less energy than Texas uses", which is frankly an astonishingly large amount of energy for something that (let's be honest here) not many people actually use for anything.
So how high can bitcoin's price really go, then? In theory there's nothing stopping it from going way up and leaving the hashrate behind, right? Well, not really - see, if the hashrate ends up rising at a much slower rate than the price of BTC, then a 51% attack becomes much more economical, thereby undermining (no pun intended) users' trust in the security of the network.
This is a BIG technical problem for Bitcoin.
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#2. If that isn't enough of an argument for an eventual bearish (or at least never-again-parabolic) BTC, then how about this: if the price goes up and up, and the energy consumption goes up and up to secure the network, it's almost guaranteed that climate considerations would force the hand of places like the EU to ban its use as a commerical payment system. So you're left with a Catch-22 - a lower hashrate invites a 51% attack, and a higher hashrate invites governments to regulate it out of the mainstream.
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#3. Yes, I'm aware that Square published a white-paper about the potential for Bitcoin to be a catalyst for renewable energy projects. And I just don't buy it; it reads to me as, "But wait, how about this: using more energy is actually greener, see?"
It's not that I don't understand the argument - time of use doesn't necessarily correlate to when the sun is shining or wind is blowing, so why not turn BTC miners on and off as necessary to make solar and wind power more efficient and increase their adoption/be a source of revenue. I get it. But look at the facts as they are: NON-subsidized solar and wind are ALREADY the cheapest sources of electricity on our grids! What more incentive do you need?
Even if you do want more of an incentive - after all, more energy efficiency is always better - then why not put blockchain technology to use in more direct ways: like, say, smart contracts that turn your EV charger on at low-demand times. Or you could use radiant heating/cooling that can deal with shorter bursts of energy input and still keep you comfortable - you could even add in an oracle blockchain to anticipate when those heating and cooling needs will peak.
The Square whitepaper, on the other hand, strikes me as just another in a long line of corporations with massive financial interests in something, desperately grasping for a way to sell the public on something so that they can continue destroying the planet unopposed. We should all keep in mind that it was oil companies that first realized that carbon emissions would cause a greenhouse effect, and then hid that research from the public.
----------------
So - what does this all mean for Bitcoin? My hunch is that it's going to be the 'name-brand' that gets people into using other cryptocurrencies on a daily basis - and then it fades away as others take over (when's the last time you used Yahoo, AltaVista or AskJeeves?) And I am all for the mass adoption of crypto in general. I'm very bullish on crypto in general! But there are real and serious issues with Bitcoin that aren't going to go away, so I'm going to start looking elsewhere for my trading/investing/hodling.
Thanks for reading! And again, if I've misunderstood something, I'm happy to be corrected. I admire the commitment of BTC fans to freedom - but keep in mind, freedom that isn't based on truth isn't really freedom at all.
(Not financial advice)
Ok. So you've probably already scoffed at the idea that bitcoin could drop in the middle of this bull run. And you're probably right, at least for the next little while. 100k is likely inevitable, and if Willy Woo and others are correct, 250k+ is quite possibly happening in our near future.
But people seem to think this is endless. Is it really going to a million dollars? 10 million?
I'm going to argue no in 3 ways:
#1. I had a shower thought yesterday, regarding something that's been coming up in the media recently, and that's the environmental impact of the energy consumption of bitcoin mining. This energy is what powers the Proof Of Work security of the whole system.
The realization was this: if bitcoin's mining hashrate is linked with the price, then every time the price doubles, so does the energy usage.
Currently Bitcoin uses an estimated 106 TWh per year, equivalent to the entire nation of Kazakhstan, according to digiconomist.net. In the Trading View chatroom I witnessed someone *defending* bitcoin's energy usage by saying "it's less energy than Texas uses", which is frankly an astonishingly large amount of energy for something that (let's be honest here) not many people actually use for anything.
So how high can bitcoin's price really go, then? In theory there's nothing stopping it from going way up and leaving the hashrate behind, right? Well, not really - see, if the hashrate ends up rising at a much slower rate than the price of BTC, then a 51% attack becomes much more economical, thereby undermining (no pun intended) users' trust in the security of the network.
This is a BIG technical problem for Bitcoin.
-------------
#2. If that isn't enough of an argument for an eventual bearish (or at least never-again-parabolic) BTC, then how about this: if the price goes up and up, and the energy consumption goes up and up to secure the network, it's almost guaranteed that climate considerations would force the hand of places like the EU to ban its use as a commerical payment system. So you're left with a Catch-22 - a lower hashrate invites a 51% attack, and a higher hashrate invites governments to regulate it out of the mainstream.
-------------
#3. Yes, I'm aware that Square published a white-paper about the potential for Bitcoin to be a catalyst for renewable energy projects. And I just don't buy it; it reads to me as, "But wait, how about this: using more energy is actually greener, see?"
It's not that I don't understand the argument - time of use doesn't necessarily correlate to when the sun is shining or wind is blowing, so why not turn BTC miners on and off as necessary to make solar and wind power more efficient and increase their adoption/be a source of revenue. I get it. But look at the facts as they are: NON-subsidized solar and wind are ALREADY the cheapest sources of electricity on our grids! What more incentive do you need?
Even if you do want more of an incentive - after all, more energy efficiency is always better - then why not put blockchain technology to use in more direct ways: like, say, smart contracts that turn your EV charger on at low-demand times. Or you could use radiant heating/cooling that can deal with shorter bursts of energy input and still keep you comfortable - you could even add in an oracle blockchain to anticipate when those heating and cooling needs will peak.
The Square whitepaper, on the other hand, strikes me as just another in a long line of corporations with massive financial interests in something, desperately grasping for a way to sell the public on something so that they can continue destroying the planet unopposed. We should all keep in mind that it was oil companies that first realized that carbon emissions would cause a greenhouse effect, and then hid that research from the public.
----------------
So - what does this all mean for Bitcoin? My hunch is that it's going to be the 'name-brand' that gets people into using other cryptocurrencies on a daily basis - and then it fades away as others take over (when's the last time you used Yahoo, AltaVista or AskJeeves?) And I am all for the mass adoption of crypto in general. I'm very bullish on crypto in general! But there are real and serious issues with Bitcoin that aren't going to go away, so I'm going to start looking elsewhere for my trading/investing/hodling.
Thanks for reading! And again, if I've misunderstood something, I'm happy to be corrected. I admire the commitment of BTC fans to freedom - but keep in mind, freedom that isn't based on truth isn't really freedom at all.
(Not financial advice)
Comment:
Hopefully the last update. I neglected the obvious: halving events.
These happen every 4 years. In theory they should double the price every 4 years, given the same hashrate/power consumption per dollar of Bitcoin value. Yet the price of Bitcoin has averaged an increase of 363% per year, or, if my math is right, about 174x every 4 years. This is only possible if the amount of power consumption increases at a roughly equivalent rate (or at least, the financial cost of the power consumption increases at a roughly equivalent rate).
In other words the price growth of Bitcoin should - in theory - slow down dramatically over the next few years - especially as our societies increase their scrutiny of energy consumption.
These happen every 4 years. In theory they should double the price every 4 years, given the same hashrate/power consumption per dollar of Bitcoin value. Yet the price of Bitcoin has averaged an increase of 363% per year, or, if my math is right, about 174x every 4 years. This is only possible if the amount of power consumption increases at a roughly equivalent rate (or at least, the financial cost of the power consumption increases at a roughly equivalent rate).
In other words the price growth of Bitcoin should - in theory - slow down dramatically over the next few years - especially as our societies increase their scrutiny of energy consumption.
One thing I hadn't taken into account was Moore's Law (aka the 1960s observation that the number of transistors in an integrated circuit doubles roughly every 2 years). Obviously we can do many more calculations, per watt, than we could with an ENIAC or Commodore 64 - so is there an energy usage equivalent to Moore's Law that would keep energy consumption stable even as hashrate goes up?
Thankfully, a Wikipedia article about Moore's Law has this answer: Dennard scaling, it says, "posits that power usage would decrease in proportion to area"... "Combined with Moore's law, performance per watt would grow at roughly the same rate as transistor density, doubling every 1-2 years."
Problem solved, right?
Well unfortunately for Bitcoin, no. Dennard scaling, the article goes on, came to an end in 2005-2010 "due to leakage currents". As transistor size gets smaller, it turns out, chips tend to heat up, and overall energy costs increase just to keep everything cool enough to continue functioning.