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The rapid rise of cryptocurrencies is spiraling out of control. Are we witnessing the final act for crypto before a significant reset and the victory of Bitcoin?
11 Million Cryptos
As per Coin Market Cap, there are currently 11.52 million cryptocurrencies in existence. At this pace, we might soon eclipse the number of Bitcoins.
The CEO of Coinbase predicts approximately 1 million new cryptocurrencies are created weekly. Brian Armstrong states that it “has become impractical to value each one separately.”
“Regulators need to realize that the demand for approval of each cryptocurrency has become utterly unreasonable,” he remarked on platform X.
This indicates that Coinbase is keen on providing a wide array of options to its users. To grasp how we reached this point, it’s essential to revisit the Bitcoin pioneer and its four critical attributes:
- Trustless: Enabling peer-to-peer transactions without a trusted intermediary;
- Permissionless: Bitcoin can be accessed by anyone;
- Censorship-resistant: Transactions cannot be blocked;
- Perfect scarcity: Only 21 million BTC can ever exist.
Bitcoin represents a culmination of cryptographic ingenuity, combining various existing technologies: public key cryptography, SHA-256 hashing algorithms, and the concept of Proof-of-Work. The outcome? An unconfiscable currency with a finite supply.
The Pandora’s box has been opened, leading to a Cambrian explosion of cryptocurrencies, for better or worse.
It is encouraging that younger generations are becoming acquainted with the complex realm of cryptography, particularly amid widespread surveillance. The surge in cryptographic protocols designed to boost privacy stands as a commendable achievement of the “crypto” boom.
However, this growth also brings along misleading ideas that can be more or less detrimental.
Selling Dreams
The concept of “Web3” (a decentralized internet powered by blockchains) is largely an illusion. While the goals are commendable, the actual decentralization is a fantasy that fails to scale.
Centralized systems are typically faster and more cost-effective. Interestingly, this is the main selling point for many cryptocurrency developers: to facilitate quicker and cheaper transactions. This oftentimes compromises decentralization—a phenomenon known as the blockchain trilemma.
Despite this, numerous tokens are launched daily. The crypto realm remains fixated on discovering “the next big thing.” Bitcoin too is not exempt from this hype, evidenced by recent trends such as Ordinals, BRC-20s, rare sats, and Runes over the past two years.
Ultimately, the sensationalism fades. Innovations once anticipated to usher us toward the elusive Web3 frequently turn out to be mere pump and dump schemes.
Each cycle brings with it a somewhat warmed-over narrative. Presently, the buzz is fueled by a mix of DeFi (again), stablecoins (again), memecoins, AI, and legacy cryptocurrencies like XRP.
After celebrities led the charge in the last cycle, it is now political figures who are spearheading trends (Trump coin, Melania coin, Libra coin…).
In the previous cycle, we witnessed yield farming, Play-to-Earn (P2E), Move-to-Earn (M2E), erratic stablecoins (Terra/LUNA), dog-themed memecoins, Bridges, NFTs, etc.
Many investors are now nursing losses… Is this a necessary evil? A case of creative destruction? A scam? Probably a combination of all these factors.
In the End, Bitcoin Prevails
The rise in popularity of memecoins is arguably a positive sign. It suggests that no one is attempting to usurp Bitcoin any longer, and the casino has finally acknowledged its true character.
Monetary supremacy is a do-or-die battle, and it is clear that Bitcoin has emerged victorious. While there are still minor, futile resistances, the game is essentially over. The United States will not establish a strategic reserve for XRP or Ethereum.
The most successful applications are financial in nature:
- Store of value;
- Currency (L2 Lightning Network);
- Stablecoins.
Why is this the case? Because the four primary features of blockchains are most beneficial for monetary and financial applications. Conversely, they often introduce friction and unnecessary costs for other uses.
Is there finally an understanding? Perhaps. This is hinted at by Bitcoin’s increasing dominance (62%) even as the total number of tokens and other cryptocurrencies persists in rising.
The upcoming cycle is likely to be more serious, with Bitcoin becoming increasingly integrated into the traditional banking sector. It will soon be feasible to secure loans using Bitcoin as collateral.
Bitcoin will serve both as a store of value and a backup payment method for all. It is poised to become an international reserve currency for nations. This should be the lasting legacy after the haze of “crypto” has completely cleared.
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Bitcoin, geopolitical, economic and energy journalist.
DISCLAIMER
This article reflects the author’s views and opinions, which are not intended as investment advice. Conduct your own research before making any investment decisions.
