Bitcoin: Will the Bullrun Last?

Author: Michael Hudson, Founder & CEO of Bitstocks

BTC is enjoying some serious time in the limelight and receiving a lot of mainstream attention. But will it ever reach $1m as some have predicted? I’m going to stick my neck out and say no. Here’s why.

Bitcoin is not digital gold; it’s not a magic get-rich-quick scheme; it’s a technology – a distributed public ledger technology to be exact. And for technology to be valuable, it has to have utility – the ability to be built on, implemented and used in a plethora of different ways. For BTC to reach a $1m price point, it would need to be useful as a technology. But it’s not.

If BTC were to achieve that price, they’d be relying on a level of (perfectly understandable) public ignorance to keep the bubble going and the price pumping. Let me address some of that lack of understanding with some easily digestible figures. Bitcoin Core (BTC) is only capable of processing approx. three-to-four transactions per second, which is 240 transactions per hour, or 350k per day, because of the restricted block size of 1MB of data. This makes the BTC token a mostly-static asset that is slow (and expensive) to transfer, which isn’t useful as a spending or payments technology.

To put this into perspective, Mastercard processes around 5,000 transactions per second. By contrast, the Bitcoin SV network is unlimited. There are no structural limits on the block size, and therefore, the number of transactions that can be processed, resulting in around 4,000 transactions per second at its peak points in 2020; not far off Mastercard levels.

So ironically, the more people wanting to buy BTC, the less useful it becomes – if you have long queues of people wanting to trade their tokens and only 350k can actually transact per day, it’s rendered useless. And the volatility of the market means that in two days when your BTC trade goes through, you can’t guarantee it will still be the same price as when you started.
For now, the volumes of BTC transactions taking place are just about sustainable – but with legitimate investment interest from hedge funds and other high net worth individuals – there will be massive transactional bottlenecks, and those queues will only get worse.

At Bitstocks, we like to use the pen and paper analogy – the blockchain is paper and bitcoin is a pen which writes on the paper. At the moment everyone is running towards the fancy 24 carat gold Parker pen (BTC) because it’s in vogue, but if it doesn’t have ink in it and it can’t write, it’s useless as a tool. What makes Bitcoin valuable as a technology is the ability to record immutable, verifiable information – which is why we direct investors to consider Bitcoin SV as the smarter choice long term.

That said, the price of Bitcoin will likely continue to rise sharply into 2021. This is for two reasons. Firstly, the current geopolitical climate, which is indicating a distinct lack of trust in fi at currencies – causing further investment in cryptocurrencies, and secondly, a cryptocurrency company called Tether, that has courted controversy since 2019 and been accused of minting fake dollars (USDT) to swell their own reserves and manipulate the market price of BTC. Investors should beware the BTC Ponzi scheme! What goes up, must come down, and a crash at some stage is all but guaranteed for BTC.

BTC’s recent price increase, I would argue, is due to the junction between the overreach of government power being at an all-time high, whilst confidence in the government sits at an all-time low. Fiat currency values are peaking as governments print stimulus money like crazy; the economic impact of the pandemic is really being felt – and we’ve seen previously that Bitcoin does well in these situations, as people look to make alternative investments and payment methods.

  • Think before you invest.
  • Always do your own thorough research before you part with any cash.
  • Check the security attributes of your investment- did it come from an ICO or was it mined?
  • Are you dealing with a proper blockchain project which is underpinned by a registered company?
  • Does it align with the original Bitcoin technology whitepaper from 2008?
  • Does it pass the Howey Test?
  • If you’re a business, could your company build infrastructure on top of it?
  • Could you find a use-case for public ledger technology within your business?

(This article refers to Bitcoin Core (BTC), rather than Bitcoin Satoshi Vision (BSV). BSV is a token of the authentic and original design of Bitcoin technology, and BTC is a variant of it.
Assessments of the market were correct on the time and date this article was first produced and are subject to change).
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