Decentralization, anonymity, and scarcity in Bitcoin
Some of the pivotal ideas to the creation of Bitcoin in 2009 were anonymity, decentralization, and the inability to print more of the same asset. However, over more than a decade, all of these founding pillars have been put to the test. Starting with anonymity, it was one of the most widespread misconceptions that Bitcoin was anonymous and, therefore, it would provide a person with better advantages to elude authority’s oversight and taxation. Nevertheless, with the implementation of KYC rules (know-your-customer) by cryptocurrency institutions and the public ledger of all transactions, this “anonymity” is reminiscent more of pseudonymity than actual anonymity.
On the topic of taxation, it was often said that due to the lack of regulation of Bitcoin (and specifically tax laws around it), one could simply avoid taxes on the accrued profit. But this is not precisely true, as some countries have general rules on taxes, without regard for the activity from which the profit was made (unless it is illegal). So, this issue is very country-specific.
As for decentralization, we have seen quite the opposite happening with the mainstream adoption of Bitcoin. Multiple large companies took advantage of early movers and became influential entities in the space. For example, 1 in every 127 Bitcoins is owned by MicroStrategy, with total holdings of 152,800 as of 1st August 2023. Then, there is the biggest crypto exchange in the world, Binance, with approximately 66% market share as of December 2022, based on the data from CryptoCompare. Another company growing influential in the cryptocurrency space is BlackRock, the world’s largest asset manager, which invested in four of the five largest crypto-mining firms and is attempting to get approved Bitcoin Spot ETF in the USA (which will again lead to more centralization).
Finally, on the subject of scarcity, Bitcoin's total supply is supposed to reach 21 million sometime in the future. While that makes a good case for scarcity, we have seen multiple Bitcoin forks that resulted in the creation of new assets with very similar characteristics out of thin air; the same applies to creating entirely new cryptocurrencies (similar if not the same as Bitcoin) and issuing derivatives of Bitcoin (leading to the scenario with more paper Bitcoin than the actual number of Bitcoin in circulation). Thus, with over 20,000 different cryptocurrencies worldwide and many more derivatives to come in the future, the scarcity topic is still up for dispute (though we believe Bitcoin will likely maintain the first place in the crypto universe).
To conclude this article, the mentioned tenants are a few things to think about and should prompt people to ask whether some of the developments in the cryptocurrency market and Bitcoin space are not defeating the sole purpose of their creation.
Technical analysis gauge
Daily time frame = Bearish
Weekly time frame = Bearish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
On the topic of taxation, it was often said that due to the lack of regulation of Bitcoin (and specifically tax laws around it), one could simply avoid taxes on the accrued profit. But this is not precisely true, as some countries have general rules on taxes, without regard for the activity from which the profit was made (unless it is illegal). So, this issue is very country-specific.
As for decentralization, we have seen quite the opposite happening with the mainstream adoption of Bitcoin. Multiple large companies took advantage of early movers and became influential entities in the space. For example, 1 in every 127 Bitcoins is owned by MicroStrategy, with total holdings of 152,800 as of 1st August 2023. Then, there is the biggest crypto exchange in the world, Binance, with approximately 66% market share as of December 2022, based on the data from CryptoCompare. Another company growing influential in the cryptocurrency space is BlackRock, the world’s largest asset manager, which invested in four of the five largest crypto-mining firms and is attempting to get approved Bitcoin Spot ETF in the USA (which will again lead to more centralization).
Finally, on the subject of scarcity, Bitcoin's total supply is supposed to reach 21 million sometime in the future. While that makes a good case for scarcity, we have seen multiple Bitcoin forks that resulted in the creation of new assets with very similar characteristics out of thin air; the same applies to creating entirely new cryptocurrencies (similar if not the same as Bitcoin) and issuing derivatives of Bitcoin (leading to the scenario with more paper Bitcoin than the actual number of Bitcoin in circulation). Thus, with over 20,000 different cryptocurrencies worldwide and many more derivatives to come in the future, the scarcity topic is still up for dispute (though we believe Bitcoin will likely maintain the first place in the crypto universe).
To conclude this article, the mentioned tenants are a few things to think about and should prompt people to ask whether some of the developments in the cryptocurrency market and Bitcoin space are not defeating the sole purpose of their creation.
Technical analysis gauge
Daily time frame = Bearish
Weekly time frame = Bearish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
