April 18, 2024 | Read Online

Byron Gilliam

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"So we beat on, boats against the current, borne back ceaselessly into the past."

- F. Scott Fitzgerald

Thursday Halving Fun Mailbag

Q: Are we halving fun yet?

Not yet, no.

Bitcoin's break above $70,000 feels anti-climatic because it was so short-lived, crypto is conspicuously underperforming the current mini-correction in risk assets, ETF inflows are sputtering, memecoins have stopped going up (and what's the point of a memecoin that's not going up?), Ordinals have lost steam, we haven't made any obvious progress on crypto use cases, the SEC is back on the anti-crypto warpath and the deluge that rained out Token2049 in Dubai feels like an anti-crypto act of God.

That is probably an overreaction to what will probably prove to be a standard dip in an upwards-trending market.

But I do think the cycle is different this time, if for no other reason than it doesn't have the manic energy of previous ones.

This should ultimately be good news, of course, because sugar highs don't last, and going up just because we're going up is not a sustainable dynamic, even in crypto.

A more subdued cycle, if that's what we're having, might become a more sustainable cycle if it gives us more time to find a more substantial reason for all of the going up we've already done.

And we could use the substance — it's still mostly an article of faith that crypto will produce utility that's even remotely commensurate with the token prices it's produced.

But lots of hopeful things are happening and, with luck, a less-manic kind of bull market will refocus attention and resources on those sorts of things.

Also, the halving is in one day!

Q: Does the halving even matter?

You'd be forgiven for not knowing we're just a day or two away from the next Bitcoin halving event, because it hasn't generated nearly as much interest as you'd expect, given how foundational it is in Bitcoin lore.

That might be because the excitement around bitcoin ETFs has pulled forward the all-time highs that we'd normally expect after a halving.

Or it might be that there wasn't much else to look forward to in previous cycles — bitcoin remains surprisingly dominant in price, but its mindshare within the industry is far lower than it used to be (even accounting for the recent excitement around Ordinals and L2s).

Or it might be that halvings don't matter much anymore, as each one is less significant than the previous one: The first halving cut emissions from 50 bitcoin per block to 25 while the upcoming fourth halving will cut emissions only from 6.25 to 3.125.

Or it might be that the halvings never mattered much to start with.

The idea that regular reductions in supply are why bitcoin goes up is more narrative than statistical reality.

Yes, bitcoin went up a lot around the last two halvings, but that's only because bitcoin almost always goes up a lot — just because bitcoin usually goes up on, say, Mondays, doesn't mean that Mondays are what make bitcoin go up.

The sample sizes are too small to draw definitive conclusions, but we also have a very recent precedent to draw on: Consider that Bitcoin Cash had its halving two weeks ago, on April 4, and is now trading 28% lower.

I take that underperformance as confirmation of my prior bias that bitcoin's capped supply isn't as all-important as it's generally made out to be.

If that sounds sacrilegious to you, answer me this: If Satoshi had set bitcoin's issuance cap at half of the current 21 million, would bitcoin be worth double its current $1.25 trillion market capitalization?

Counterfactuals are disprovable, but creating half the number of bitcoin presumably would not have doubled the demand for them. I take that as evidence that it's the demand side that matters most.

Counterintuitively, that may be what the quadrennial reductions in supply are really about: Satoshi himself may have viewed them primarily as a way to draw attention to bitcoin.

This, too, confirms my prior: Scarcity doesn't create value — but the meme of scarcity does.

Q: Is bitcoin a memecoin then?

I see what you're doing here — you're trying to get me crypto-canceled and I won't take the bait.

The cryptocurrency bitcoin is the native token for the Bitcoin blockchain, so it has real utility — and bitcoin is money because it's the unit of account and means of exchange for NFTs on the Bitcoin blockchain, as well as in a growing ecosystem of Bitcoin-based DeFi.

Someone not afraid of being crypto-canceled might argue that DOGE, (which everyone agrees is a memecoin), is also the native token of the Dogecoin blockchain. And that Ordinals, inscriptions and DeFi on Bitcoin is an incredibly niche market that's hardly six months old.

That sort of brave truth-teller might also argue that the overwhelming majority of bitcoin's $1.25 trillion market capitalization could only possibly be attributed to the idea of Bitcoin — and that the price of bitcoin simply goes up when the idea of Bitcoin spreads.

So where do I stand?

I might say Bitcoin is a meme but that bitcoin is not a memecoin — and hope that my cagey use of capitalization makes both sides think I agree with them.

― Byron Gilliam

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Does The Bitcoin Halving Still Matter?

This week we discuss the current state of crypto after the weekend flash crash. As Bitcoin struggles to break $70,000 with conviction, will the 2024 halving be a strong catalyst for more bullish price action going forward?

Watch or listen to 1000x on YouTube, Spotify or Apple.

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cdixon.eth @cdixon

I wrote an oped in @FT.

My goal isn't to defend or to diminish memecoins.

It's to point out the backward incentives of a regulatory regime in the US that lets only memecoins thrive — while companies and tokens with more productive uses face hurdles.

ft.com/content/1ceaa1…

Apr 18, 2024

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