Bitcoin is not actually scarce, and here's the math. First, there are $250 billion of Bitcoin sitting on exchanges right now. That means if the price goes up, this number goes up with it. That's not scarce — that's a lot of Bitcoin that could be bought. Beyond that, while yes, 60% of Bitcoin hasn't moved in the last year, that could change at any time. There could be even more Bitcoin that becomes available to purchase.
You have to consider that scarcity is the basic difference between demand and supply. What most people don't realize with Bitcoin is that the demand is almost all marketing and manufactured. Almost no one realizes that underneath all the hype and marketing and talk about how Bitcoin is some special currency, it's just basically a spreadsheet secured with cryptography. You use these cryptographic algorithms to get in there and send a transaction, which then gets recorded on a public ledger. That isn't very fundamentally useful outside of having centralized exchanges do almost all the transactions — transactions that don't even happen on the blockchain.
There Are Things Much More Scarce Than Bitcoin
There are things much more scarce in the world, like Internet Computer Protocol, for example. There's only about $150 million of Internet Computer Protocol sitting on exchanges. Meanwhile, ICP represents the most advanced infrastructure in the world, which is really important for AI and for preventing cybercrime, and for saving a ton of money on hosting — I moved jerrybanfield.com off of Web2 hosting and moved it onto the blockchain. Plus, ICP can be locked: about 40% of it is locked and used for voting, and it's bought and burned for computation.
So what people aren't seeing with Bitcoin is that when you dive into the details of this scarcity idea, scarcity for Bitcoin totally depends on having people want to buy much more of it than there actually is for sale. And then the problem is: what do you actually do with Bitcoin? There's nothing to do with Bitcoin except let it sit there in your wallet and hope the price goes up.
The Wallets Themselves Are Extremely Risky
And then the wallets themselves are extremely risky. If you're holding it on an exchange, there are people who could push one button that would take all of your money, or your account could just be shut down. You could have the exchange lose your money or collapse, the exchange could get hacked, or you could get phished and accidentally send your crypto to a wrong address. Then you could lose it yourself trying to run a hardware wallet — your hardware wallet could get compromised or lost. If you try to take your Bitcoin and do something with it like DeFi, you're getting into another risk layer that introduces a bunch of attack surfaces: you have wrapped Bitcoin, you have all these Bitcoin clones, and things like Coinbase's cbBTC. That's not even real Bitcoin, because Coinbase supposedly has the Bitcoin and then they're using it on an Ethereum layer 2.
So right now there's this idea that Bitcoin is so scarce, but reality indicates that there are tons of Bitcoin you could buy. Hardly any real person is limited here — 99% of people could buy as much Bitcoin as they wanted and it's not going to move the price at all. At this point, you have to have institutions and governments buy more Bitcoin to even give any type of evidence that maybe there's a little bit of scarcity. And when you've reached that point, the average person should be asking: well, isn't there anything more scarce than Bitcoin?
When Bitcoin Actually Was Scarce
If you had grabbed Bitcoin back when the market cap was a few hundred million dollars — back when I was in Bitcoin — then yes, that was very scarce. The amount of money you could put into it versus the amount of the supply you could get, that was scarce, because a small amount of money would buy a bunch of the supply. But that window didn't last. Now, even if you try to buy hundreds of millions of dollars of Bitcoin, you're still only going to get a relatively small percentage of the supply. And that means it's not scarce. If you have a hundred million dollars and you just end up with a few Bitcoin because of that, that is abundant. There's a ton of it. There's way more than is needed.
The Sustainability Problem
The biggest problem with Bitcoin, though, is how this is going to be sustainable in the future outside of price action. Right now, there are tons of risks in Bitcoin. You have to deal with quantum computing. You have to deal with what is going to happen when the next halving comes around if the price isn't in the hundreds of thousands at a minimum and the fees are not sustaining the network. Scarcity depends on long-term viability, and Bitcoin's price action has continually gotten more and more disappointing. And that's because the giant whales that have huge amounts of Bitcoin have every incentive to sell right now, or sell when the price goes up, and take gigantic profits. Meanwhile, retail is sitting there watching videos about how scarce Bitcoin is, watching endless price charts, and the price appreciation is pretty small.
If you want scarcity, you've got to find something where your money could buy you a significant percentage of the supply — and get you a return in terms of an APR just for holding. That's one of the things that sucks the most about Bitcoin, and to me it drastically reduces both the perceived and real scarcity. Think about economic scarcity: why are people going to keep buying Bitcoin if the price doesn't constantly go up? That's the big problem with it, because with something like ICP, even if the price stays flat, you still get an APR with it. Whereas with Bitcoin, we've had lots of points where it traded sideways or consistently went down. And if you can't constantly have prices spiking and going up and people making money, then there's no incentive to just hold it.
Diminishing Returns, Cycle After Cycle
Bitcoin has had diminishing returns for years, where each previous cycle high makes the next cycle high disappointing. 2017 and 2013 — those were huge Bitcoin cycles. 2021 wasn't as good as those. And the last cycle was not nearly as good as 2021. At this rate, we're heading toward a future where Bitcoin barely even hits all-time highs again and just kind of stays flat indefinitely. And then you don't even get an APR for holding it — you're just taking a huge amount of risk.
With Bitcoin, the way I see it, we are plateauing. This is not something that's going to keep going up forever. The momentum is slowing down further and further, and it's going to keep slowing. And the more the momentum slows down, the more people understand that there's almost nothing you can do with Bitcoin — at least nothing that actually happens on the Bitcoin blockchain itself. Almost everything happens off the blockchain, which takes on a ton of additional risks: wrapped Bitcoin, or letting it sit on an exchange and getting an APR from the exchange when you don't even have the Bitcoin in your wallet. The more people understand the reality that Bitcoin is a 17-year-old blockchain that does seven transactions a second, that can't do hardly anything without depending on centralized tech and centralized entities like banks, ETFs, and crypto exchanges, the more the scarcity continues to drop.
So what I see is that this perceived scarcity is going to continue to drop for Bitcoin as we go forward, and people are going to keep looking for things that are better. And once you find Internet Computer Protocol, you can literally buy a thousand times as much of the supply buying ICP as you can with Bitcoin. That is so much more scarce. At this rate, there are all kinds of people in the world who have enough money that they could — not realistically, given price appreciation, but theoretically — buy all the ICP in the world. Almost nobody, except maybe Elon Musk, could theoretically buy all the Bitcoin off of exchanges. That's how big it is.
The Math on Miner Sell Pressure and the Coming Plateau
So Bitcoin scarcity is something you need to research further. Yes, the issuance has some scarcity to it with the 21 million cap. However, there are tens of millions of dollars of Bitcoin being unlocked via mining every single day. That's tens of millions of dollars of net buying pressure you need every day just to keep the price the same, because miners are often dumping immediately. And Bitcoin is so vulnerable to plateauing. What I see is Bitcoin slowly plateauing, where we're getting toward the high, and it may be a very slow process with smaller and smaller deviations up and down. But once Bitcoin plateaus, it's going to go down — once people see that there aren't going to be big Bitcoin markets anymore, that there aren't going to be these all-time highs in crazy amounts.
Because when you have somebody like Michael Saylor, his whole position is dependent on the Bitcoin price always going up. What if the thesis changes? What if there are so much better opportunities, like ICP compared to Bitcoin — then what's going to happen? Bitcoin is going to plateau, and then it's going to consistently fail to even reach new all-time highs.
Yes, inflation is the one thing that does counter this. But if you consider inflation, Bitcoin's markets have been extremely disappointing. If you account for inflation, especially in 2021 and the last market, you've barely kept up with inflation. Yes, you got a little bit ahead of inflation. But at least when I'm investing in crypto, I'm not looking to just barely beat inflation — I'm looking for the absolute best return on my money. And therefore, there's no way I would hold Bitcoin again. It's just too big, it's too outdated, and there are too many better options.
Why I See Bitcoin as a Waste of Capital
Bitcoin at this point — in my view there's no reason to hold it because of the opportunity cost. There's no real scarcity to me with Bitcoin. For me, putting my money into Bitcoin is basically a waste of capital. And when people see that Bitcoin has peaked and that putting money into it is a waste of capital, everything is in position to come crashing down. Some of the big holders are likely to dump huge amounts of Bitcoin, which will increase even further the amount of Bitcoin that's available to buy. And from there, you could have Bitcoin just trend downwards for years and years and years. That, to me, is the future of Bitcoin.
I hope you found this helpful — and this obviously wasn't financial advice, just my own experience and opinion. I don't have any Bitcoin. I'm all in on ICP.
And if you want to talk crypto with me and do much more, you can chat with me anytime, and check out all the crypto videos I make on my Crypto Reviews playlist.