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, it’s some variation of the following: “Now is the time to buy—because in the next few years bitcoin will overtake the market cap of gold and hit a million USD.”
There’s truth to that sentiment. After the bitcoin top of the 2017 bull run close to $20,000, the world’s largest cryptocurrency dropped to a low of $3,600 in the onset of the COVID-19 pandemic. That crash, dubbed “Black Thursday,” mimicked the stock market crash of the time, calling into question the argument among crypto—and especially Bitcoin—functions independently of traditional financial markets. Less than a year later, the world’s first cryptocurrency reached an all time high above $68,500.
Bitcoin has proven to be tech’s comeback kid.
But things are different this time. For one thing, the U.S. Federal Reserve in June announced it would raise interest rates to a range of 1.5%-1.75%—the biggest rate hike since the ‘90s. That announcement certainly hasn’t put the nail in the coffin of Bitcoin, which has remained in the $19-$21k range since then. Still, it will have longer term implications on the market, as institutions eliminate their riskier assets.
Bitcoin might seem like a safe investment in crypto circles, especially when compared to other, newer cryptocurrencies. But if tech stocks count 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 rising amount of energy needed to mine new Bitcoin. Everyone who loves and appreciates crypto understands the brilliance behind Bitcoin’s halving events, which cut the reward for miners in half every four years and theoretically boost the price. With the rise in real-dollar value per bitcoin, what were once laptop miners became mining pools, leading to a computing arms race between miners. This arms race will continue to intensify—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 about 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 lovers love to counter that the global financial system requires much more energy than that. Still, considering bitcoin’s energy footprint is expected to rise, the question that follows is whether it’s worth the climate cost.
Bitcoin hasn’t yet proven to be an inflation hedge, in line with the argument that the currency should be considered “digital gold.” Nor is it widely used as a currency, as it was originally intended to be.
Furthermore, other, more environmentally conscious blockchains that are also faster and in many ways more modern—such as Cardano and Algorand—have launched since the Bitcoin whitepaper was released. Even blockchain gaming platforms are starting to be environmentally conscious—Virtually Human Studio-backed NFT game Anomura, for example, will give players an option to contribute their in-game rewards toward restoring kelp in Southern California and plant mangrove forests in Indonesia. So the question here isn’t whether crypto as an industry is environmentally viable—it’s whether Bitcoin, an in-many-ways outdated blockchain that’s slow to update, is.
And let’s for a moment expand that question beyond just the environmental concerns, because really it applies to every other aspect of the blockchain that needs rapid updating. When you have blockchains even younger than Ethereum, Polkadot, and Cardano, such as Partisia Blockchain, offering interoperability and unlimited transaction bandwidth, with each new shard adding 1,000 transactions per second, what does Bitcoin offer that newer blockchains don’t?
The only answer at this point beyond first-mover advantage seems to be true decentralization. That’s a big answer considering the entire purpose of blockchain was always to decentralize finance, and every other crypto startup worth mentioning is managed by a clearly identifiable executive of some sort. As it stands, it’s hard to imagine any other cryptocurrency overtaking bitcoin’s market share purely based on that fact. But the only way bitcoin’s price can rise to its previous all time high, or even surpass it to cross the $100k mark as countless analysts have predicted it would, is through attracting new investors.
Most of these investors aren’t going to be convinced based on decentralization alone. Until someone figures out a viable use case for bitcoin that will lead to mass adoption, rather than just mass investment, there’s no reason for it to moon like we all want it to.
About 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.