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Bitcoin has stood the test of time. Buying bitcoins today is much less risky than it was 10 years ago, 5 years ago, and even 1 year ago.
In brief
- Bitcoin has become a treasury asset for major companies like MicroStrategy and Tesla, with growing support from financial institutions and states, such as the United States considering making it a reserve currency.
- The approval of Bitcoin ETFs, the entry of major banks into the sector, the development of user-friendly applications, and a network secured by a hashrate of 800 exahash make buying and storing bitcoins simpler and safer than ten years ago.
- Facing global inflation, currency devaluations, and geopolitical tensions, bitcoin establishes itself as a store of value and a stateless currency, even attracting some governments.
- The Lightning Network has solved transaction throughput limits, but bitcoin is mainly recognized as a store of value rather than a means of payment. Its ecological impact is being fully reassessed positively, while fears of bans fade in favor of debates on taxation.
Some were fortunate to get bitcoins for a handful of figs, but apart from a few cypherpunks, very few held onto them. There was a time when you could visit a website to get 5 BTC for free and when pizzas were bought for several thousand BTC.
Millions of BTC were lost because no one really believed in it. Putting all one’s savings into it was considered, rightly so, irresponsible. Ten years later, that is no longer true.
1 – Increased adoption and institutional support
Bitcoin is part of the treasury of hundreds of institutional investors like Microstrategy, Tesla, Block.one, Tether, SpaceX, and also The Blockchain Group in France.
Not a week goes by without a major group announcing bitcoin as their main treasury asset. It was the Chinese textile firm Addentax (8,000 BTC) this week, and Twenty One Capital the week before (42,000 BTC). Soon Amazon?…
Soon all major banks will accept bitcoin as collateral (Goldman Sachs is considering it). Twenty One Capital will be the first serious company to offer loans collateralized by BTC. The offered rate (12%) is spicy, but will decrease thanks to competition.
States are also involved, and no small players. The government of Donald Trump clearly wants to make bitcoin the United States’ reserve currency, as highlighted by a recent Morgan Stanley estimate. Senator Cynthia Lummis even proposes selling gold to accumulate it.
Overall, it is estimated that exchanges collectively have between 100 and 200 million active clients. That’s just as many potential voters to satisfy… And by the way, 50 million bitcoin addresses have a balance above zero, suggesting up to 50 million “hodlers” (probably ~15 million people).
2 – Accessibility and security
The approval of Bitcoin ETFs in the United States last year was a turning point. Over 41 billion dollars have been invested via BlackRock, Fidelity, and others.
The regulatory easing brought by the new US government suggests that major banks like BNY Mellon, State Street, and Citi will join in the coming months. U.S. Bank (the fifth largest retail bank) and Revolut already hold bitcoins on behalf of their clients.
Buying and storing bitcoins is no longer as complex and risky. While one million BTC were hacked between 2009 and 2020, only 4,500 BTC have been hacked since 2020. That’s 450 million dollars, compared with 130 billion dollars in bank card fraud.
It is now child’s play to buy bitcoins via user-friendly and secure applications. Not to mention the myriad of hardware wallets allowing full ownership of bitcoins (Trezor, Ledger, Safepal, etc.).
The Bitcoin network is also much safer than ten years ago thanks to the increase in “hashrate.” We are now at 800 billion billion hashes per second (800,000,000,000,000,000,000 h/s).
Reaching 800 EH/s would require manufacturing 4 million Antminer S21s and investing 12 billion dollars. In short, the likelihood of a state taking control of the network to undermine its growth has become minimal.
This computing power ensures true decentralization and strengthens the long-term investment thesis.
3 – Geopolitical and economic contexts
The global economic landscape has changed significantly since 2015. The 25% inflation of the last five years has severely eroded purchasing power. For many, it was their first experience with high inflation after 30 years of controlled inflation, around 2% per year.
Some countries have experienced much more dramatic inflation rates. Notably Turkey (750%), Argentina (2,500%), and Venezuela (1,000,000% in 2023).
It is therefore natural that bitcoin increasingly attracts interest as a hedge against the depreciation of national currencies. BlackRock’s CEO did not mince words in his annual letter to investors:
The United States has long benefited from the dollar’s status as the dominant global reserve currency. However, this privilege is not guaranteed in perpetuity. If the US fails to control its debt and allows its deficits to grow uncontrollably, Bitcoin could wrest its status as the international reserve currency.
Larry Fink, CEO of BlackRock
Add economic difficulties to geopolitical tensions, and it is not very surprising that a stateless, uncensorable currency like bitcoin stands out.
Taiwan, a country at high risk in the event of an escalation in Sino-American tensions, has understood this well. Taiwanese legislator Ko Ju-Chun recently called for adding bitcoin to the country’s foreign exchange reserves.
His main argument was that “bitcoin cannot be subjected to a [Chinese] blockade/embargo”. This is the island’s great fear, as its currency would then collapse on the forex market.
Our article on the subject: Bitcoin: Taiwan’s Shield Against a Chinese Embargo
4 – Many unknowns have found answers
One of the great unknowns in 2015 was whether bitcoin could increase its transaction throughput (7 transactions/sec) without sacrificing decentralization.
Since then, the development of the Lightning Network (LN) has dispelled concerns. Bitcoin transaction throughput is now theoretically unlimited. [However, all exchanges would need to adopt it, which is not the case due to lack of demand and losses for exchanges, especially in transaction fees.]
The low demand is due to the fact that bitcoin transactions (with LN) are not competitive against Visa and Mastercard. The reason being that exchanges charge transaction fees when buying bitcoins.
Don’t miss our article on the Lightning Network: The Game-Changing Network Transforming Bitcoin
The current mainstream view is that bitcoin does not need to replace national currencies to “succeed.” The key argument is that a complex society needs to create money ex nihilo to finance capital-intensive infrastructure like nuclear plants, railways, etc.
This is called the “fiat system”: banks lend money created ex nihilo, which is destroyed upon repayment. However, bitcoins cannot be created ex nihilo, and this is precisely their advantage. Fiat currencies and bitcoin do not serve the same purpose.
It has also become very clear that bitcoin is not the ecological disaster it was made out to be, quite the opposite. It will soon become an indispensable tool for demand-side adjustment of electric grids. Many very serious studies acknowledge this:
Finally, the specter of a Chinese-style ban belongs definitively to the past. The current issue is to choose the right tax regime. For example, there is no capital gains tax in Germany, Portugal, and in the Czech Republic when holding bitcoins for several years (without speculation).
Bitcoin should be treated as a currency and therefore not taxed. This is the last frontier, which will surely be crossed by the US government.
Don’t miss our article: Bitcoin: “We Have A Breaking Down Of The Monetary Order”.
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Bitcoin, geopolitical, economic and energy journalist.
