The Future of Bitcoin

What is the future of Bitcoin?

This is a question that people are starting to ask as the early signs of a new bull market could be appearing. We are approaching a year and a half of the bear market which was brutal. Of course, all bears are that way.

Bitcoin peaked a bit over $65,000 and pulled back to the $15K level. That is painful no matter how you frame it.

That said, Bitcoin is known for its wild swings. Both bulls and bears can be powerful. If we are at the start of another bull, many are going to surmise where the next level will get to.

Outside of that, what is the future of Bitcoin?

This is a question that can elicit a wide range of answers. Here we will break it down a bit.

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Secure Network

Bitcoin utilizes the proof-of-work consensus mechanism. This has attracted a lot of attention due to the energy usage yet it does bring something practical to market.

PoW is a very secure mechanism if the 51% attack potential is surpassed. Bitcoin has achieved this. There is enough decentralization with miners which means that not only is an attack likely, it is a network that will keep running regardless of the response.

It is vital to have a secure system where monetary transfer can occur. Going back to the tenets of Satoshi Nakamoto, we see this operate without the banks or governments. It operates outside their reach.

This is only increasing as time passes. More miners are set up with larger hash consistently being produced.

For this reason, one thing we can count on is Bitcoin being a secure monetary system.

Asset of Collaterlization

Collateral is very important. Bitcoin could fill this role, at least for long term loans.

This coin is capped in terms of the number available. With only 21 million ever to be produced, this implies some scarcity. While this might help price, it does no favors for volatility. Scarcity means there will always be a degree of volatility.

This is a problem for using BTC as collateral on short term transactions. The overnight lending market, which is the largest in the world, is ill-suited for this asset. If the volatility is even 5%, that means an over-collateralization rate of at least 7% to compensate for volatility. This is before we add in the risk factors that lenders are going to apply.

Even if it is not ideal for short term lending, this could be the opposite when we look at longer term contracts. With a market capitalization that gets into the trillions during the next bull, we could see this really enhance the financial viability of the economy. This can be leverage for long term projects.

Reserve

This is an idea is tied to the collateralization.

Balance sheet of financial institutions is very important. Right now the tax implications are an issue. However, longer term, we can see the idea of Bitcoin being on the balance sheets of corporations, banks, and even central banks.

As a reserve, this is a way for long terms HODLing to take place with money that could garner a larger return over time. It could also serve as a foundation for the asset base. This is a similar role that gold presently occupies, bringing up the notion of digital gold.

How all of this factors into the price of the coin remains to be determined. However, we can see some significant use cases for Bitcoin based upon these characteristics.

Article by @taskmaster4450le

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