Why I Don’t Own Bitcoin Anymore

I first got into crypto by buying Bitcoin in 2013. Last week, I finally sold the last of my BTC (for ETH). I get the question “why are you moving away from Bitcoin” all the time so I figured I’d write up a post to send people to…

First off, I don’t hate Bitcoin. I think it’s a totally fine asset to own. But here are a few reasons why I don’t:

Productive assets vs Pet rock assets

In general, I try to own assets that have real end user demand/utility/cash flow over ones that are strictly reliant on market supply and demand.

There is a huge amount of end user demand for ETH: NFTs, Defi, etc. ETH’s market cap is less than half of BTC’s, but the Ethereum network does more than 10 times the amount of daily fees than the Bitcoin network. Fees represent demand for block space.

Bitcoin has done a great job winning the “digital gold” / store of value asset class. But from a tech perspective there is very little demand to actually use it. Even more worrisome, ETH is starting to compete with BTC as a store of value as goods like NFTs are increasingly denominated in ETH.

Once Ethereum transitions to Proof of Stake (more on this later), anyone will be able to easily stake their ETH and earn yield (projected around 5-10%) that makes it even more attractive as a productive asset.

Bitcoin is going to face serious security and decentralization issues

The block reward earned by miners who secure the Bitcoin network gets slashed in half every 4 years. By 2140, there will be no block rewards at all.

In the Bitcoin whitepaper, the idea was that hopefully there would be so much network adoption by this point that transaction fees would make up for the reduced block rewards.

It seems pretty clear we aren’t headed that direction. Bitcoin is excelling as a store of value, but it isn’t something people want to transact with. The Bitcoin community will ridicule you to HFSP for spending your Bitcoin, whereas in the Ethereum community people are racing to set their ETH on fire for new NFT mints, trading dog coins, etc.

Yes, Bitcoin has a long time before it’ll need to solve this issue. But it’s becoming more and more entrenched in “there are and will only ever be 21 million Bitcoins” with a community that is so resistant to change. Without modest inflation or a huge reversal in attitude toward actually transacting with Bitcoin, it’s hard to see how Bitcoin can maintain security and decentralization.

ESG concerns are going to be hard for Bitcoin to shake

Bitcoin mining operations are moving to more and more clean energy, which is great. But at the end of the day I don’t think it’s going to do much to appease environmental concerns. The messaging is just too complicated.

Ethereum on the other hand has a very clean answer to this problem: they are moving from Proof of Work to Proof of Stake, which will reduce the energy consumption of the network by 99%+. Simple, easy to understand answer that will get through to no-coiners.

No matter how clean Bitcoin gets, or how inaccurate/unfair environmental concerns are, I think it is going to continue to have a VERY tough time shaking this criticism.

The Bitcoin community isn’t pro-capitalism

Bitcoiners have generally been antagonistic toward new tokens and anything that generates wealth for a builder, rather than BTC holders as a whole. Whereas getting rich off of a newly launched shitcoin is a badge of honor in the Ethereum community.

This has led to a vibe that’s felt more like communism (Bitcoin) vs capitalism (Ethereum). We know how this ends up: innovation, progress, and economic rewards end up with the capitalists.

The Bitcoin community is focused on tribalism over innovation

Bitcoiners have been incredibly resistant to change, while the rest of the industry is moving at warp speed. If BTC added modern smart contracts and had a plan for long term inflation to secure the network, I think it could catch up in the technological arms race.

But the community (right now at least) will just never let this happen. The Bitcoin community is so cringingely tribal. You can’t even debate these points on Twitter without immediately being spammed TRAITOR by 100 laser eye accounts (who most likely got into crypto in the past 2 years, have a 4 figure bankroll, and haven’t used any dapps).

In my view, this tribalism has alienated the smartest people in the crypto space. Devs and builders working on cutting edge problems don’t want to spend all their time arguing over this stuff. The smartest minds in crypto are just not working on Bitcoin.

Bitcoin isn’t performing as an inflation or bear market hedge

Historically a lot of the narrative around Bitcoin has been that it will perform as something like an inflation hedge, bear market hedge, or currency.

It’s not playing out that way right now (although I could see that changing over a long timeframe). For the past year, BTC and ETH have closely tracked the Nasdaq. For better or worse, the market views them as risk assets and is bucketing them with things like tech stocks.

If I’m going to own a crypto asset and the market is putting it in that bucket, I want to own the one that looks more like a tech company with innovation and end user demand (ETH, not BTC).

Here are a few common rebuttals I get, and my thoughts on them…

Ethereum’s merge to Proof of Stake will lead to “rich get richer”

Not nearly to the extent that Proof of Work does. Mining operations have massive economies of scale and barriers to entry. If you can’t order containers of ASICs at a time and negotiate massive energy contracts, you’re at a huge disadvantage in Proof of Work mining.

With liquid staking options like Lido, Rocket Pool, and exchange staking programs, it’s trivially easy to participate in Proof of Stake no matter how small your bankroll is.

But Bitcoin will be able to do everything Ethereum can!

A very common argument. Something about taproot, Stacks, yadda yadda. While it may be true (a stretch) on a technical level… the fact is the Bitcoin community has been very resistant to change. And just about 0% of smart contract activity is currently occurring there.

So long as Ethereum and other smart contract blockchains are innovating at a blazing fast pace, I wouldn’t bet on Bitcoin waking up and taking their market share.

Ethereum has been saying they are merging to Proof of Stake for 7 years

Yep, and it’s actually going to happen now. Seriously – if you follow the progress around the merge, you know it’s around the corner. I’ll take a little action on merging by EOY at even money, or give you 2:1 odds for a merge in the next 12 months.

Final Thoughts

Again, I’m not bearish on Bitcoin. I don’t think it sucks or anything. Its first mover advantage and lindy effect give it the right to be basically the only crypto that can refuse to innovate and still win (as a store of value). But right now, I’m much happier owning ETH.

If you want to debate any of these points, or troll me for being a Bitcoinless moron – catch me on Twitter.

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