Eps 39: The Future of Bitcoin
— The too lazy to register an account podcast
The imminent halving of the "block subsidy" exposes a fundamental threat to Bitcoin.
The subsidy typically makes up over 99% of the total income (see Graph 1 below, left-hand side).
Scenarios involving lower liquidity mean that on-chain bitcoin trading will either be much slower or subject to much higher fees than is the case today.
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Host
Roger Marshall
Podcast Content
One of the most concrete events that will take place in 2020 is the halving of Bitcoin in May, halving the number of Bitcoins that will be rewarded for successfully mining a block in the digital register from 12.5 to 6.25 BTC. The last time this happened was in July 2016, when Bitcoin prices soared off the charts, but the crypto market was not nearly as popular then as it has been since when the reward fell from 25 Bitcoins to 12.5 Bitcoins.
While some argue that halving is priced in (i.e. everyone knows it will happen), others suspect that reducing the reward will make buying Bitcoins more urgent.
Given that so little has happened in the last three years, it is hard to say whether Ether's $14 billion market cap is justified. Indeed, cryptocurrencies have a collective market capitalization of more than $300 billion, differentiating them from other cryptocurrencies such as Bitcoin, Ethereum, and Litecoin, which have a total market capitalization of more than $1.5 billion.
There are thousands of digital currencies, but Bitcoin is by far the most popular, accounting for nearly 70% of cryptocurrencies. Bitcoin has neither created the blockchain nor challenged the regulatory obstacles that stand in the way of a new wave of applications. But it has become easier than ever to buy and hold bitcoin, as new platforms have helped users avoid industry downturns and make bitcoin more accessible than ever.
The next 10 years will determine whether the cryptocurrency really gains momentum and emerges as a competitor to traditional currencies. It would be foolish to announce and write off the death of Bitcoin, but its flaws could make it the most popular digital currency of its kind in history. Bitcoin could define 2010, and its death could at least be announced in the coming months, if not years.
Libra thus has the potential to become the world's first widely accepted cryptocurrency. Just as Facebook usurped MySpace and Bebo in the early days of social media, the cryptocurrency could take Bitcoin's crown in 2010.
The market for cryptocurrencies is growing, and more and more people are working on crypto projects to do what Bitcoin could not. However, the fact that the most popular crypto coins get their value from their users will not change anytime soon.
This means that the high volatility of the market will not go anywhere in the near future. Many crypto traders are optimistic about the imminent halving in May, but not everyone is convinced.
While debate has focused on the future of the underlying technology called blockchain, a leading cryptocurrency investor told CNBC that the price of bitcoin could fall to zero. He said many people think it will rise in half, but almost all investors have had similar experiences and will decide for themselves whether they want to continue. The number of people who want to buy bitcoin and other cryptocurrencies is no longer growing.
After hitting record highs in 2017, the price of Bitcoin, one of the world's most popular digital currencies, has fallen dramatically. Cryptocurrencies had a wild year in 2016, wiping out the entire $480 billion market in value. In the first quarter of 2017 alone, $93 billion was withdrawn from the cryptocurrency market, leading to a 48% drop in the value of Bitcoin, which quickly materialized.
With a bitcoin halving event around the corner, here's what you might expect to happen. With bitcoin set to stop trading in May, Draper believes the price of bitcoin could reach an all-time high of $250,000 by 2022.
He said the bitcoin market looks like it will rise or fall in half during the halving, but not necessarily in the same way as other cryptocurrencies.
Such volatility in the bitcoin market is a good thing for traders operating in the high-tech cryptocurrency industry, as they can benefit from small price changes. This is also the view of Andreas Schulz, a cryptocurrency investor from Berlin who works for a large trading company.
He wants the price level to allow him to invest in new computer technology to earn more Bitcoins. Blockstream's founders are betting that blockchain is a much more interesting and powerful technology, because it applies not only to Bitcoin, but also to other digital currencies such as Ethereum and Litecoin. London-based Bitcoin data firm Bitstamp estimates that the digital currency has received more than $1.5 billion in loans and investments since Bitcoin was born five years ago.