Bitcoin (BTC)

Bitcoin, the first ever cryptocurrency started of as a medium of exchange and is now becoming a store of value.

You can love Bitcoin or you can hate Bitcoin, but you can't ignore Bitcoin.

Bitcoin is the world's first cryptocurrency and has always been the largest by market capitalization. 

1. Bitcoin payments are maturing 

Bitcoin is slow. Its transactional throughput is 7 transactions / second and its transactional finality is 60 minutes! But you can still use Bitcoin to pay for a burger in El Salvador! Confused? 

That's the magic of the Lightning Network which uses its own native smart-contract scripting language along with real Bitcoin transactions to enable secure, high volume, and high-speed Bitcoin transactions. 

On 7 September 2021, El Salvador became the world’s first country to recognize Bitcoin as a legal tender. And in March 2022, the Swiss City of Lugano made Bitcoin 'De Facto' legal tender. Lugano, in addition to allowing crypto for taxes, is aiming to have all of its businesses seamlessly use crypto for everyday transactions.

2. Smart contracts, NFT, DeFi, and DApps on Bitcoin

Many people don't know that you can run smart contracts, non-fungible tokens (NFT), and decentralized applications (DApps) on Bitcoin!

That's the magic of: 

  • Liquid Network
  • Omni Layer
  • Stacks
  • Merged mining blockchains

Liquid Network is a sidechain-based settlement network that enables faster, more confidential Bitcoin transactions & digital assets issuance.

Omni Layer is a software layer on top of the Bitcoin blockchain for creating & trading custom digital assets & currencies.

Stacks is an open-source blockchain that leverages Bitcoin for decentralized apps and smart contracts. Since Stacks uses Bitcoin as a base layer, everything that happens on Stacks is settled on the Bitcoin Blockchain. Stacks connects directly to the Bitcoin blockchain through its proof-of-transfer (PoX) consensus mechanism.

Merged mining (technically called auxiliary proof of work) is the process of mining two or more blockchains at the same time. Essentially the same proof of work can be used on multiple chains.

Bitcoin merged mining blockchains include RSK, Elastos (ELA), Myriad (XMY), Unobtanium (UNO), Syscoin (SYS), Terracoin (TRC), and Blast (BLAST).

RSK enables smart contracts on top of Bitcoin, near-instant payments through RIF Lumino, and
greater scalability for Bitcoin.

3. Crypto trading pairs

Trading pairs are cryptos that can be traded for each other on an exchange e.g. Bitcoin / Ether (BTC/ETH). Many cryptocurrencies can only be bought with Bitcoin. This helps maintain the importance of Bitcoin in the crypto world.

4. Bitcoin as a store of value

A store of value is an asset whose value either remains the same or increases over time. Some of the most popular stores of value are gold, real estate, and even art.

I believe that Bitcoin is becoming globally accepted as a store of value, and its total market cap would equal that of gold by 2030.

Depending upon your source of information, the market cap of all the gold in the world is estimated to be between $8 trillion - $12.7 trillion. So in the long term, the marketcap of Bitcoin would be between $8 trillion - $12.7 trillion.

Considering a maximum supply of 21 million bitcoins, I think a fair long-term price would be somewhere between US$ 380,952 and US$ 604,762.

This is subject to 1 critical caveat - the blockchain technology is not "broken".

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Bitcoin as a medium of exchange

Bitcoin is not a great medium of exchange. It is very volatile and suffers from slow transaction speeds. Compare it to UPI payments in India and Bitcoin seems like a cruel joke.

It doesn't make too much sense to use Bitcoin for payments. There are so many better alternatives available in the crypto world. You could use dollar-pegged stablecoins. You could use hush/privacy coins like Monero or you could use regular old coins like Litecoin. All of these are faster, cheaper, and less volatile.

HODLing - holding on for dear life

There are so many memes about this that many people think it's actually a good investment strategy! The concept is that if you buy a little bit of Bitcoin and hold on to it forever, then you will become super-rich. If only life were that easy!

Buying the dip

This means that every time Bitcoin prices dip, you buy more Bitcoin. This is an extension of HODLing. It means that you believe that Bitcoin prices will keep rising forever. So every time prices dip, you buy more.

Bitcoin maximalists

Bitcoin maximalists believe that Bitcoin is the only viable digital asset and all other cryptos are sh*tcoins. They are oblivious to the massive innovation being done by Ethereum, Cardano, Solana, Polkadot, Theta, Filecoin, and so many other awesome crypto projects.

Bitcoin as a store of value

A store of value is an asset whose value either remains the same or increases over time. Some of the most popular stores of value are precious metals, real estate, treasury bills, and even art.

If Bitcoin becomes globally accepted as a store of value, then its total market cap could equal that of gold.

Depending upon your source of information, the market cap of all the gold in the world is between 8 to 10 trillion dollars. So the long-term marketcap of Bitcoin could be between US$ 8 to 10 trillion.

Considering a maximum supply of 21 million bitcoins, we think a fair long-term price would be somewhere between US$ 380,000 and US$ 476,000. We expect to see this price by 2030 AD.

This is subject to two critical caveats - the blockchain technology is not "broken" and no meteor crashes into our lovely planet :-)

What if Bitcoin gets hacked?

Bitcoin is totally dependent upon technology. If a major flaw is found and exploited, then Bitcoin will immediately lose its value and would crash to zero.

While blockchain is a robust technology, it has been hacked in the past - on 15 August 2010 when a transaction created 184,467,440,737.09551616 bitcoins.

That's more than 184 billion! Yes, you read that right. We all know that the total number of bitcoins that can ever exist is 21 million. But here we suddenly had hundreds of billions of bitcoins!

The problem was solved within a few hours. This "bad" transaction does not exist on the blockchain anymore. Neither do the billions of bitcoins created by the hackers. But 0.5 bitcoins that were consumed by the transaction still exist and are indelible proof of bitcoin's hack!

Can another successful hack take place? Of course, it can. And that's what we fear the most.

 

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