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The Rise and Fall of Bitcoin Maximalism in 2020
Hey DEFI WORLD community,
If you are on Twitter regularly, you might have seen one of those Bitcoin maximalists, who only believe in Bitcoin. Everything else, no matter if it is Ethereum or any given DeFi protocol, is a scam!
But how did this mindset evolve? Our friend and partner Michael wrote a guest article about Bitcoin maximalism this week. We highly recommend you to subscribe to his YouTube channel “Cryptocito”, where he interviews important people in the space and shares his thoughts and strategies with you. He will reach the 500 subscribers bench mark very soon, so stay tuned for his giveaway!
Also check him out on Twitter: @cryptocito.
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The Sequence of Maximalism
Unfortunately, the crypto community is very divided: From bitcoin Maxi’s to the XRP army or Link Marines - everybody believes to be „right“ and possess ultimate, universal truth. The actual truth, however, is that people are different. Everyone has different demands, requirements, opinions, evaluation methods and preferences. As a result of that, we have to acknowledge diversity and start collaborating more on things that we agree on, instead of fighting about things we disagree on.
As we are entering the next stage of a massive bull run, my deep concern is that we are not maximising the potential that decentralized ledger technologies and cryptocurrencies offer, because we are too much caught up debating who is right or wrong.
The unfortunate yet inevitable consequence will be delay in innovation, more friction, immense opportunity cost and even more division within the crypto community. On top of that, we are not maximising the potentials to achieve mass adoption for cryptocurrencies and thus important lose time in the race to set a new global economy that is led by the people, for the people.
How Bitcoin Maximalism became a Thing
In 2017, when blockchain and cryptocurrencies went viral at scale, a lot of people rushed into a lot of alternative cryptocurrencies with the hopes to get rich quickly. This led to a massive bubble that peaked out and burst early 2018. Those people then lost a lot of money, yet remained interested in the technology. In 2018 and 2019 we saw a massive bear market that wiped out a lot of alt coin projects and proved, that „Bitcoin is still King“.
Doing the aftermaths, it is obvious that having held bitcoin during the harsh bear market wasn’t as bad as holding any other alt coin: bitcoin „only“ lost 80-85% from it’s peak, while other cryptocurrencies lost more than 90% - some are not even operating anymore.
As a result of that, a lot of people who joined the crypto industry in 2017 and burnt their hands investing into random white papers, later became bitcoin maximalists. They used the time of the bear market to study economic theories and ideal monetary systems. However, they got caught up with the idea that as if just buying into bitcoin with a small % of their wealth is enough to change the world.
The good news is that this bitcoin maximalism is dying out. Why? Well, DeFi went viral. Ignited by Uniswap, Compound & Co. decentralized lending, staking and yield farming was born. A new hype wave that would silence bitcoin maximalists - because now their most reasonable argument is not valid anymore: price!
Being a Maximalist of Anything is harmful
In my opinion, it is great to have a „favorite“. Whether it is a color, a car brand, a type of food or a music genre. Everybody has favorites. What I believe to be extremely dangerous though, is to build a cult around just one thing and declare everything else as the enemy. Judging a book by its cover has never been a smart strategy. It is a lack in mindset and spreads negative energy that will cause immense opportunity cost for us who are within the crypto industry and those that want to join and especially for those who blindly follow this ideology. Therefore, I highly encourage you to always listen to both sides of the argument, make your own picture and evaluate for yourself. The crypto industry is full of sharks and everybody will try to sell you their opinion as if it was the standard.
Is DeFi just Starting?
Now that we cleared that bitcoin fanaticism is coming to an end, let’s talk about DeFi. In my opinion, DeFi is here to stay. It is the missing piece for it to go truly viral, because it provides so much more use case scenarios for cryptocurrencies, that go way beyond ‚hodling’. However, the current velocity of new products that come out of no where and generate 10x , 50x or even 1000x in a matter of days [$YFI] clearly shows us that this market niche is already in a bubble. The only question is how big will this bubble get?
$YFI chart (Source: CoinGecko)
The actual revolution behind DeFi is that you can put your cryptocurrencies to work. You can generate more by mining liquidity, borrowing or staking. These features are incredibly useful and necessary because it gives the entire space an indistinguishable dynamic that makes it so attractive. It is very hard to predict the future, but DeFi is definitely initiating the next bull run. Certainly the bitcoin halving in May, paired with global economic uncertainties, political instabilities and rising inflations has also contributed a big portion to drive more traffic and eyeballs onto cryptocurrencies as an alternative.
The 3rd quarter of 2020 has been one of the most exciting and important periods for the entire crypto space. We have seen that bitcoin and other cryptocurrencies are gaining interest during global instabilities on traditional financial markets in combination with a pandemic, especially in high-inflation countries like Venezuela, Turkey or Argentina!
Transactions per month in Latin America; Increasing number of transactions since 2014 (Source: Bitcoin.com )
As more people are getting aware of cryptocurrencies as an alternative, new economic system that we are building, I strongly believe that it is responsibility to reflect the ideology of togetherness and diversity - now more than ever.
I also highly encourage you to try not to be too emotional trading cryptocurrencies. Speaking of my own experience, I know how tempting it can be buying into the latest trending alt coin that everyone speaks about. Know your strategy, limits and suck in as many information as possible to take wise decisions.
All information presented above is for educational purposes only and should not be taken as investment advice.