Having faith: 15 reflections on Bitcoin and the crypto market

Our salvation is: Energy, Computing, Cryptocurrency.

It all started here. Everything we talked about when we started building Blockworks, the world’s first Bitcoin investment firm, a decade ago, is now here. So why isn’t Bitcoin a million dollars yet?

If we exclude Bitcoin and Ethereum, this is what the crypto market has been like for the past five years: the coins may have changed, but the overall numbers haven’t. That’s a big problem — there’s no growth.

The market in 2024 is primarily supported by two consistent buyers — MicroStrategy and BlackRock, but these buyers are not evangelists, but mercenaries. Buyers of MSTR (MicroStrategy) are arbitrage convertible bonds, and buyers of IBIT (iShares Bitcoin ETF) are arbitrage basis. These two hold 6% of the Bitcoin supply. This is our black swan event.

Despite the promise of innovation and endless public chain propaganda on Twitter, Bitcoin’s market dominance is rising, not falling.

There is only one Bitcoin industry, one Bitcoin story, and one Bitcoin market.

Let’s look at Bitcoin. We’ve had many amazing rallies driven by narratives and money flows. But what narrative or money flow will push us past the high of “US government holds Bitcoin as strategic reserve”?

While decentralized finance (DeFi) shows amazing potential, traditional finance (TradFi) is gaining ground when it comes to revenue. Stablecoins and ETFs (Exchange Traded Funds) are expected to bring $9.1 billion in revenue to institutions in fiscal year 2025. In contrast, DeFi protocols are expected to generate $9 billion in revenue in the same period, but this number is largely dependent on the trading activity of Meme coins.

Institutional investors are pouring in! Yes, they see an opportunity to make money and they want a piece of the pie. Nothing personal - it's just business. For Trump, he came to DAS (Digital Asset Summit) because there was a lot of money to be made. Nothing personal - it's just business.

They are mercenaries, not evangelists.

The institutional innovators who tweet about crypto adoption and the frontline warriors who tweet about Meme coins have more in common than you think.

We need to stop idolizing and start thinking.

Stop being stupid. (This includes myself, by the way)

You know what the most profound thing in crypto is?

Proof of Work.

Bitcoin showed the world how to build the energy-to-compute value chain and created $60 billion in public equity value.

I’ve said this many times: Bitcoin accelerated AI by at least a decade. Bitcoin created a new data center business model with behind-the-meter colocation, flexible load, demand response, and hedging with underlying assets. It’s profoundly transformative.

I’ve never said this publicly, but it’s time to say it: Proof of Stake was a mistake. Ethereum could have grown into a trillion-dollar protocol with a robust energy-to-compute ecosystem. The reality is that the MEV (maximum extractable value) mechanism has extracted billions of dollars of value from users and applications.

Ethereum once led Nvidia’s rally, but now it can’t lead the market.

We need to get back to basics. Many markets are reaching a moment of reckoning, and crypto is no exception. You can’t defy the laws of physics. But where do we go from here?

Our salvation is: energy, computing, cryptocurrency.

It’s that simple.

The rest of the story is unfolding slowly - it’s our work.

Ten years ago, I believed in Bitcoin and invested all my time and energy in it. A group of crazy people on the Internet made the global reserve cryptocurrency a reality through memes. Imagine what else we can do.

It’s important to have faith.