After getting burned and burned again, you’d think the naysayers would eventually learn that cryptocurrencies aren’t going away.
How many times have you heard so-called “experts” come out and declare that “Bitcoin is dead,” only to later eat crow or go silent?
Bitcoin Obituaries says it’s 263 times and counting.
As evidence for the “Bitcoin-is-dying” thesis, some like to cite falling numbers of Bitcoin transactions.
It’s the lowest it’s been in over two years, reports Bloomberg.
This means Bitcoin is going into a long-term bear market, they argue.
“Bitcoin is dying,” chimes in the crytocritic chorus once again.
We were the first to cover this story when we published our Bitcoin whitepaper explaining the C+ rating we gave it at the time.
We pointed out that, as the price of Bitcoin falls, so does usage on its network. Bitcoin was being used mostly for speculation. So, when the bull market takes a break, we wrote, most investors will lose interest and move on.
We never said Bitcoin was dying. Nor was our C+ a bad grade. It’s in the high end of our “fair.”
And right now, Bitcoin’s rating is up a notch to B-. That’s not a great grade, either. The upgrade is due to some relative price stability and moderate improvements in the Lightning Network. Not big news. Just an improvement of a few decimal points in our underlying score.
Here’s the key: Bitcoin is NOT dying. It’s still an ultimate store of value in the crypto space and overall. It’s still the benchmark for cryptocurrencies overall.
Meanwhile, I think the folks behind the Bloomberg story are wrong for some other reasons as well.
First, Bloomberg relies on a chart that uses what I consider to be the wrong data for this particular argument:
Good for smoothing out data? Maybe. But when you do that, you can also lose what could be very important data points.
So, let’s use the same data source Bloomberg uses. And let’s look at the raw number of transactions on the Bitcoin Network:
The red circles highlight the lowest transaction levels we’ve seen in recent times.
When you use the raw data, it turns out that on-chain transactions for the Bitcoin network are as low as they’ve been since August 2017, not the lowest in “over 2 years.”
That’s not just a technical difference. It underscores a fundamental principle: Usage is holding at a base level despite Bitcoin’s real-world challenges we’ve pointed out and despite any attempts to resurrect the old “Bitcoin-is-dead” thesis.
You may be wondering: What happened in August 2017?
Another price decline! Nothing more. Specifically …
1. Bitcoin transactions set new highs in late May 2017.
2. Prices then topped out in early June.
3. Prices touched bottom in late July.
4. And then transactions recovered soon thereafter.
Interestingly, in that cycle back in 2017, prices recovered before transactions. So, what mostly drove people back into Bitcoin was a rising price. Not much else!
This time around, Bitcoin is again taking a breather. But its transaction and price behavior is similar to last time. And perfectly normal.
Bitcoin’s transaction and price behavior is in line with typical behavior we almost always see on the Bitcoin network.
This doesn’t wash away our concerns about Bitcoin, mind you. We still find it rather troubling to see such a high correlation between on-chain transactions and price action.
It continues to suggest the main use case for Bitcoin today is a vehicle for speculation. And we’d like to see more real adoption of this currency.
That said, we feel the need to call this to the attention of Bloomberg readers: This is NOTHING we haven’t seen before with Bitcoin. It’s same old, same old. No cause for alarm. Yet.