Bitcoin
Why Did You Invest In Bitcoin?
Motivations, Risks, and Uninformed Decisions
Let’s start off by saying:
You have absolutely no clue what you invested in.
Now, before you start questioning your choices, let me unravel this mystery.
We are the average Joe. The average retail investor that hears the word Bitcoin on CNBC, jumps up from the couch, and tries to find ways to buy some.
Don’t take this the wrong way. Institutions don’t really know what they are doing either.
Fund managers will allocate investors’ money to assets they do not comprehend, supposedly buying exposure to high risk, without grasping fundamentals or even the underlying intention.
The ignorant but powerful top-paid executives will make the worst decisions possible and face no consequences for their actions.
At the end of the day, it is we, the average people, that will pay for all of this. Because we always do.
But let’s keep that aside for now and shift our attention to the main query at hand.
Why Did You Invest In Bitcoin?
When Bitcoin was launched, it was not intended to become a digital asset for finance and fund managers to speculate on.
Institutional speculation was a new narrative, one that found ground in 2015 and fully materialized in 2017.
Have you actually wondered why exactly are so many people investing in it? What are they doing, why are they speculating on the price of BTC?
The price of Bitcoin BTC.
That’s what they speculate on.
But there has to be something more than just the price, right?
Well, it appears that there is nothing else but the price.
Everyone is simply speculating on the price of a digital asset that does not work as it initially intended, and its entire current community does not want it to work either.
Why is the price still rising, though?
Why is there demand, and what purpose does Bitcoin BTC serve? How does it serve our societies?
You should probably realize there is a significant error of judgment on the part of financial analysts of some of the top funds in the world.
The network has been rendered obsolete.
It is not used in commerce as the network is often clogged with transaction fees touching $70 or even higher, and currently, people are using it to store JPEG images of ugly monkeys on the blockchain (Ordinals)!
The part of the Bitcoin community that foresaw this decadence, split and proceeded with the original intention in 2017.
Bitcoin forked in August 2017, and the chain was split.
The version that works is Bitcoin (BCH), yet Bitcoin Cash, in terms of market cap, is less than 1% of Bitcoin BTC!
And this was the plan of finance.
The Bankers’ Plans For BTC
Have a look at some of the names of those who came, saw, and altered the dynamics of digital money.
Novogratz, the Winklevoss Twins, Chamath Palihapitiya, Barry Silbert, and several other bankers, CEOs, and Wall Street guys have been reshaping the future of Bitcoin since 2013.
They decided the BTC version had to sustain the 1MB limit, and never scale.
Mass adoption is overrated, they claim.
Portfolio manager Gabor Gurbacs was on point (PlanB failed massively though).
For Gurbacs, this is always the game: Number Go Up.
Everyone is happy with NGU, so why bother delivering decentralized financial services to everyone and banking the unbanked?
It was all finalized in 2015, when Blockstream stepped up, coordinated discussions, and convinced the miners and exchanges that Segwit and Lightning was the solution.
Blockstream (Core devs, Adam Back, and Samson Mow) replaced the Satoshi-era devs (Gavin Andresen, Mike Hearn, Jeff Garzik) and assumed control of the project.
Well, eight years later, the results are in.
Lightning and Segwit were not the solutions but a monstrosity perhaps deliberately placed as a decoy to turn the community against a hard fork that would raise the block size.
It was a power struggle, but the side that won was the one going against the very fundamentals of Satoshi’s creation.
BTC, today, is the Bitcoin version that does not disrupt anything, the one with no revolutionary sparkle left. A version of Bitcoin obsolete and useless, limited and restricted from global adoption.
Blockstream, a for-profit company funded by financial giants that Bitcoin was disrupting (perhaps intentionally) destroyed the potential of Bitcoin BTC as the bankers were asking for a new narrative.
See, they had bought into Bitcoin early and were always looking to make Bitcoin more bank-friendly, and more systemic.
They planned this integration into finance, but not as a disruptive tool empowering all individuals. They planned control and control they acquired.
What is Bitcoin today?
A censorship-resistant tool at the hands of the wealthy.
A Bitcoin, not for people who live on less than $2 a day (in 2016), and perhaps, today not for the people who live with less than $70, and so on.
But do the wealthy need anything like Bitcoin?
Apparently not, as they already own the banking system.
Yet, this is how the business world works. Whenever a disruptive competitor appears, the big corporations will buy them off, or try to destroy them with any means possible.
Bitcoin, being decentralized was not anywhere easy to just ask the government to shut down. Therefore, it had to fall from the inside.
The Cycle Of Enlightenment
You are a BTC laser-eyed maximalist expecting massive returns from your investment but also feel concerned that progress has stalled, LN has entirely failed, and requires centralization to properly work.
You feel there’s something wrong, but you don’t know what yet.
This is your journey into Bitcoin, represented by the Dunning-Kruger chart:
Each one of us can identify our position in this chart.
This is also the chart of mass adoption but on a macro scale. Once everyone gets it, we all reach the plateau of mass adoption.
This chart is empirically describing competence at work but can also apply on several other occasions. David Dunning and Justin Kruger are highly esteemed psychologists and presented their essential work.
The Dunning-Kruger effect explains how people at lower levels of competence tend to be overconfident and overestimate their abilities. This will occasionally lead to tragedies as the wrong person was at the wrong job but had convinced everyone he was not.
Actually, I made the last part up. I don’t know what exactly, Dunning-Kruger said, but analyzed this chart and considered what it could represent and how it can be deemed useful on occasion.
Demand Answers
For how long do you plan to stay at the peak of Mount Stupid?
Maybe this is the best time to start asking questions.
Ask those questions that matter at the right place and observe the reactions first and answers later.
Ask directly at the bitcointalk forum.
You will discover a lot about the psychosynthesis and motives of every laser-eyed individual there.
After Mount Stupid, we descend into the valley of despair and conclude that it was most likely all a sham. Nothing was actually working as we expected and most communities were only interested in hype and the pump.
Prices are dropping, nobody is using the networks, and people just mint and trade ugly Ape images all over again, but this time on the BTC blockchain!
Wasn’t the 1MB block size limit supposedly barring people from spamming the network with jpegs?
Why do we still need a 1MB limit if it only generates high fees and acts as a bottleneck to mass adoption? Why do we need RBF, and even worse, why was there any need for Lightning to begin with?
Oh, the fees, yes. The miners need them to sustain the network with their one quadrillion zettahash!
The Miners
No, they never needed bottlenecks to halt adoption.
Miners never needed production quotas, and fiercely opposed Blockstream’s plans, at least for a while.
Miners will only care to follow consensus rules and utilize as much hash power as possible to mine the next block.
They generate more profit from fees when people use the network.
The Ordinals Parenthesis
We have to also note that with Ordinals a lot of variables changed and the miners seem to be profiting grossly as the BTC blockchain is turning into a catalog of million of NFTs, all inscribed on top of sats (a sat or Satoshi is the minimum denomination currently of Bitcoin — 1sat=0.00000001), also turning these satoshis from fungible to non-fungible (since they are now distinct).
With Ordinals utilizing Segwit/Taproot (with a virtual size of 4MB block), indeed transactions have increased and the fees also created vast profits for Bitcoin miners.
However, Ordinals also altered entirely the monetary aspect of BTC.
Perhaps this fundamental change will bring results we can’t currently foresee regarding the future evolution of a use case. However, as it all stands right now, it can also be something that will be entirely forgotten later, or even entirely removed from BTC via an upgrade or hard fork.
Taproot was coded, tested, and launched by Core developers, the same devs that also coded, tested, and deployed software in Bitcoin containing a destructive inflation bug that could have been catastrophic for the network if a Bitcoin Cash dev hadn’t found it and notified Core.
We close here the Ordinals parenthesis, which was necessary though to set things straight regarding Bitcoin’s chances of survival under yet another new narrative.
Miners Follow Profit
The miners are for-profit companies.
The purpose of a company is always profit (and supposedly also to contribute to the common good of our societies but that is probably not what companies care about, therefore let’s just say profit).
Miners indeed seem to be the giants carrying the network on their shoulders. The miners are the primary sector that generates new Bitcoins via the mining process by utilizing vast amounts of energy to solve the SHA256 cryptographic puzzle of Bitcoin.
The miner that solves each puzzle is the one that finds (or mines) the new block that is immediately broadcasted to the network (every node).
The miner that mines the new block will receive newly mined Bitcoins (currently 6.25, after the halving of 3,125), via what is called the coinbase transaction (has nothing to do with the Coinbase exchange), and they also get paid all of the fees from the transactions included in the block.
The question here is whether miners would be more profitable if Bitcoin allowed more transactions per block by raising the 1MB block size limit (virtually 4MB with Segwit) or the second assumption is that the network will become so influential that users will be corporations, funds, banks, and governments that will be paying premium fees to use it.
Seems absurd right now to think that Bitcoin would be incorporated so much into finance that powerful economic entities would want to use it, when the banking system seems to fit their needs, since, they control it.
Therefore the miners currently choose this since they still profit.
However, in case an alternative blockchain utilizing the SHA256 algorithm delivers more profit, they instantly switch hashrate accordingly.
Allocation Of Hashrate
The alternative here is Bitcoin Cash, and indeed miners support it and consider it a backup plan in case anything goes wrong with Bitcoin BTC (did we already mention the inflation bug)?
Therefore while Bitcoin Cash follows its own trajectory in the crypto domain, it is also supported heavily by SHA256 miners.
Furthermore, when considering security concerns, we often encounter extreme views that Bitcoin Cash is ready to get 51% attacked due to low hash power. In the seven years since the 2017 split, this never happened.
A 51% doesn’t happen all this time as miners protect Bitcoin Cash.
It is part of their business, and plan for it accordingly. The rented hash rate examples with just a couple thousand of dollars cost that we often listen to from ignorant individuals not realizing that in fact, such an attack would cost several millions of dollars, just to even try and attack the BCH blockchain and the result would always be these millions lost for the attacker.
Upon building massive hash power and getting ready to attack BCH, the attacker will meet double the hash rate required already allocated.
Perhaps, being a backup plan is not entirely suitable for the version of Bitcoin that works as the whitepaper describes and under the intentions of the early community, however, this is also what finance decided when it supported and funded Blockstream as the leading developing company.
P2P adoption stalled after 2017, and transactions have indeed not reached a significant scale in the Bitcoin Cash network.
In case adoption increases, perhaps due to a fiat Black Swan event, and people start using cryptocurrencies, probably they won’t be using BTC with $5 — $70 fees, but the version that works and has all the infrastructure ready, and that’s Bitcoin Cash.
No matter what, there is an alternative to the coming fiat and CBDC disasters ready to onboard hundreds of millions.
The Global Bitcoin Casino
We find today a gigantic network worth 1 trillion dollars.
But why is the market cap this much when nobody is using it in commerce?
Apparently, this one trillion is missing from the global gambling industry.
Today, this is all gambling.
The moment we join this space we did that for the money, for the profit. We are drawn into Bitcoin after learning of the excessive returns of the early adopters and the vast profit we can accumulate by just “hodling”.
Just HODL it. That’s what they say.
Undertake a risk by investing as much as you can afford to lose (I’m not sure why we should afford to lose anything), and just HODL, as it’s going to the moon!
Yet, after a while, we have to begin our research. It is not logical to keep gambling our money without learning the game, and research always pays off.
The potential of blockchain technology keeps us from exiting this casino.
And the alternative to the menace of fiat.
We stay since there is this slight today prospect of mass adoption, and in case mass adoption and usage occur, then we are indeed still early.
We also stay as in case something terrible happens to the economy or fiat currencies, we will have an alternative (obviously that won’t be BTC).
The vast promotion of Bitcoin BTC, and Tether (the centralized stablecoin) also have had a role in supporting the price of BTC at extremely high levels.
However, the most important factor that sustains BTC is gambling.
This is what Bitcoin resorted to.
Global Adoption Of P2P Electronic Cash
So, if you are still reading, perhaps you can now understand why I selected Bitcoin Cash.
BCH is the only chain I see as viable to sustain mass adoption (we are talking hundreds of millions of users). The only chain with potential to achieve this.
In Bitcoin Cash this is what absolutely everyone is comitted on.
When you download a BCH wallet (all are non-custodial), transfer some BCH, and send just $1 to a random guy in Venezuela that posted a QR code just for fun, then you will find out.
Once you scan that QR code, and discover that you instantly paid someone thousands of miles away (borderless), with fees lower than a penny, without having to ask anyone of permission (permissionless), without trusted parties involved as intermediaries capable of freezing your funds and censoring your transaction (censorship-resistance), then you just found Bitcoin.
In Conclusion
If you still got 14 more minutes of your time left, I also recommend watching a mini documentary I recently produced:
Another question we can consider is what happens to all the rest of innovation. We watch projects reach billions of market cap and disappear.
They come and go.
The global pump and dump of penny stocks works perfectly in this domain and adds to the concentration of wealth in the hands of a few.
I’m not interested in the next centralized vaporware, blockchains with admin keys, or centralized foundations with presales of pre-mined tokens aiming to dump it later.
Chains that stand the test of time will prevail.
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