Bitcoin has been on a crazy run in 2021. But even at the time when Elon Musk is loading up on Bitcoin, thousands of laser-eye acolytes are championing the first cryptocurrency on Twitter, and your grandma is asking you about that BTC thing, the main question remains intact since 2017: how on earth Bitcoin is going to make it with its exorbitant fees?
It has already started to lose momentum with online payments as a whole and online casinos in particular as no one is willing to pay a fee of twenty to fifty dollars. And even for huge payments – where BTC should have been the best solution – there are enough worthwhile alternatives. For example, you can pay to any casino online you prefer with Bitcoin Cash with a $0.002 fee and get your money delivered almost instantly. Or you can use Nano for the same purpose.
The Watershed Moment for Bitcoin
To understand why BTC is in a precarious position, you have to understand the nature of market cycles in the first place. Every financial market moves in cycles, but cryptocurrencies do it faster than traditional assets like stocks, bonds, and cash for two main reasons:
- Crypto market is still very small.
- Cryptocurrencies are traded 24/7.
Even though being used for only a decade, cryptocurrencies are almost ingrained in our minds as something that will stay. Bitcoin still carries the torch, especially in bear markets when most funds go from smaller cryptos to BTC as the biggest and therefore less volatile crypto. On the flip side, after BTC tops out in a bull market – which it always does before altcoins – altcoins follow, usually with a much better performance.
But then again, if we look at the bitcoin dominance graph, we can clearly see that Bitcoin slowly but steadily loses its leading position. Up until March 2017, the BTC dominance had never been lower than 95%; at the time of writing, the dominance is battling the 50% level and will likely drop lower as many altcoins offer much better solutions than BTC does.
It seems that if BTC were to lose its 1st rank even for a while, it would never regain it again as the only factor that keeps BTC afloat is its network effect based on its wide adoption as a store of value. Speaking of which, the ‘store of value’ narrative is dubious itself: why on earth would you store value in crypto which you cannot use when there are actually better alternatives with real use cases? The watershed moment is approaching. Be ready.
Lightning Network May Not Save the Day
The lightning network is a potentially significant upgrade to scale transaction capacity (without it, BTC can only process 7 transactions per second, a totally unacceptable number for the global currency) through a system of contracts that have a claim on real Bitcoin reserves. In practice, though, it’s not that rosy at all.
First of all, you have to trust your counterpart on the payment channel, meaning the system is not trustless – and if not, why use BTC in the first place? Secondly, you have to lock up some amount of Bitcoin to make a transaction, which is uncomfortable, and you must be online when you pay. Finally, it’s too complicated for an average user, and it’s now processing only a fraction of payments going through Bitcoin.
Do Online Casinos Really Care?
Not at all. Unlike many companies that buy Bitcoin only as a speculative asset with no underlying value – to sell it at a higher price without paying with it between buying and selling – online casinos accept cryptos which people actually use. But they really don’t care whether it’s Bitcoin or any other crypto that brings users as long as it does bring them. That’s why in addition to Bitcoin, online platforms accept Ethereum, Ripple, Bitcoin Cash, Dash, Zcash, Litecoin, and other cryptos – and the list will only grow as new cryptocurrencies stand the test of time.
As for Bitcoin, it’s no longer a viable payment option, and there’s really no convincing evidence that it will ever evolve farther than the lightning network and a quite controversial store of value narrative. As long as Bitcoin continues to print money out of thin air for its holders, it will remain relevant, but once there are no new users to join, it will be incredibly hard for BTC to retain its dominant position without having any use case barring pure speculation.