Over the last year, since the release of the ETF’s Bitcoin has outperformed the rest of the crypto market on a risk adjusted basis.
This has led to more maximalism and less attention to DeFi and Web3.
There are negative opinions on why alts are failing to compete, whether it’s the Ethereum Foundation’s management or Solana’s memecoin madness. Let’s take a look at the real reasons why Bitcoin is outperforming.
1. Michael Saylor
I don’t think it can be overemphasised how much Michael Saylor has done for Bitcoin markets. His company (micro)Strategy has poured $35.63 into purchasing Bitcoin, the majority of which is in the last year as he’s accelerated his purchasing.
Saylor is a hardline Bitcoin maximalist famous for his “There is no second best” rant. If those funds had been distributed across the entire industry then markets would look very different.
When the TWAP machine turns on he bids without discretion deliberately pushing the price up without any care about execution efficiency. This has secondary effects that pulls in 3rd party capital from funds and traders monitoring the moves and market dynamics.
2. Wall St. Brand Name
When I have to explain what I do for a living it normally goes something like this.
I write smart contract code for decentralized blockchains. You’ve heard of Bitcoin right? Well it’s a bit like that but with a virtual machine that executes 3rd party code. Yeah I work with computers.
Bitcoin is the brand that the entire world knows. If you asked a 100 people at random that work on Wall Street you’d be hard pushed to find someone that hasn’t heard of it. How many of those same people could name any smart contract platform?
I believe this will change over time as decentralized computing evolves into a disruptive technology for web development. But currently Bitcoin is the only cryptocurrency that has global brand recognition.
In the last 5 years it has evolved from a “rat poison” scam to something traditional finance and now governments are embracing.
3. Vision Achieved
Perhaps the biggest reason why Bitcoin has outperformed is that it the only cryptocurrency project that has truly achieved it’s vision.
Bitcoin is being held as a store of value by the United States. It is being used for global trade between nation states.
Perhaps we haven’t seen the ultimate vision of the separation of state and finance yet. But it is positioned well if major FIAT currencies ever fail.
Bitcoin’s code is seen as dogma and the miners have the ultimate say in what is adopted. This means that there are unlikely to be any major upgrades in the future outside of essential requirements.
Bitcoin is essentially a finished product. This stability sits well with institutional investors.
There is a lot of negative sentiment across the industry, especially within my circle of smart contract developers and founders.
I don’t believe that everything else is failing. It’s just taking longer to achieve and we are comparing it to the best performing asset of the last decade.
