Messari Daily Brief Feb. 18, 2021: What would make you bearish?

SUBSCRIBE

I posed what I thought was a pretty good question the other day on twitter, and got some excellent, thoughtful responses. It’s a sort of bookend to Tuesday’s post on the costliness of maximalism: "If you’re a BTC or ETH maximalist what would have to happen to shake conviction in your preferred network?”

Here were some of my favorite responses:

For Bitcoin:

+ Market cap dominance reversal: “If BTC lost the number 1 market cap, it would shake a lot of maxi conviction.” and "Despite some of the common narrative of sharp crashes, I think that if Bitcoin failed it would be a slow gradual decline. a) Innovation and lightning slow/ fail; b) Adoption rate slows; c) Price has a slow prolonged bearish decline; d) Governments over-regulate; e) community loses vigor.” In other words, Bitcoin is innocent until proven guilty.

+ Mining collapse causes security issues: "Price collapses far enough and long enough that ASIC mining becomes permanently unaffordable. This means something like a 4-year bear market at a pre-ASIC price... This would potentially destroy the security of the network. Without specialized ASIC miners, the network is fragile.” I agree. Network security in proof-of-work networks is one of those “hidden-in-plain-sight” risks that is perennially overstated, but presents a legitimate geopolitical concern. (China)

+ Government attacks: “A reversion to the gold standard. Maybe if governments banned bitcoin for institutions and new central bank digital currencies backed by actual reserves.” This seems…unlikely.

+ Quantum attacks: "Quantum computers solving SHA-256 before we realize. Fraudulent transactions for months/years. Slow movement from the dev team to switch the Hash.” and "Speaking as a BTC maxi scientist, only a persistent double-spend could falsify my belief in the correctness of the Nakamoto Consensus thesis (and thus resolve the Bitcoin Experiment).” A lot of things will break in a world with quantum computing. Crypto double spends are the least of our worries in that case.

+ Craig Wright as Satoshi: "Not a maxi, but if Craig Wright moved tokens from Satoshi's wallet.” At first glance, this would destroy bitcoin’s creator mythology, but prove to be a temporary (and perhaps net positive) shock to the system. I put the likeliness of this scenario at <1%, but if it did happen, than CSW certainly seems to be the type of “watch the world burn” figure, and I think uncertainty over his massive sales would curb institutional bitcoin interest.

For Ethereum:

+ ETH Killers gaining traction: “If something like DOT, SOL, etc. made a fast trustless bridge and DeFi projects started migrating over and benefitting from cheap transactions at scale while ETH 1.0 thrashed around in scaling hell for another 1+ year, I’d probably jump ship.” and "If the main blue chips built on ethereum switch to ADA through the ERC-converter because there is no more value on using ETH until the next phase of ETH2 scaling. DOT is promising in the NFT space so I’d say a successful dapp / superfarm looks promising.” And "ETH - current DEFI/NFT's majors moving to other chains.” and “ETH - Other layer 1 blockchains become easier to develop for and cheaper/faster to use. Especially if crosschain solutions take off.” and "Other L1s moving first with innovation and unlocking value (hint: unlock staking liquidity).” and "If anything worthwhile was built on anything other than Ethereum, it could give me pause. So far... crickets... except for bridges to Ethereum.” Common concern, reflected in the 3-5x rally we’ve seen in six weeks for Layer 1 alternatives.

+ ETH2 scaling stall: "ETH2 is basically the binary future of ETH. It is another arpanet in it's current state, but it could evolve.” and "An ETH sharding interoperability apocalypse” This isn’t necessarily to the benefit of competitors. ETH2 breakdowns would constrict ecosystem-wide growth for the foreseeable future.I think this sums up my thinking for the most part as well, but it’s good to leverage the wisdom of the crowds.What do you think they/I missed?

Headlines that matter:

• INTEL: Cosmos, Kava, Chainlink, YFI, Filecoin, Ethereum, KEEP, Flow, Cardano (+15 updates)
• Blackrock is dabbling in BTC
• Motley Fool buys $5 million in BTC for its balance sheet after writing it off 8 years ago
• ETH-backed stablecoin RAI is live (Reflexer Labs)
• Nic Carter on writing (for aspiring crypto analysts)
• What happens if all stablecoin users have to be identified (CoinDesk)
• Bill Gates updates outlook on BTC to neutral (CoinDesk)
• How to bring off-chain assets to DeFi (CoinDesk)
• Lamar Wilson gets Jack Dorsey support to create more Black BTC millionaires (Decrypt)
• Daily Shade: Roaring Kitty should get a medal, not a cross-examination