If there is a lesson to learn from the latest crypto crash, here is the one: stop buying anything besides Bitcoin. In other words, Bitcoin might be the only cryptocurrency you need.
We knew crypto market can be rather harsh and volatile, but the latest events have shown that most coins simply can’t stand the hit. Bitcoin has also fallen during the crypto crash, but to a much smaller extent.
So is it time for Bitcoin maximalists to shine? Maybe they were right and Bitcoin is the only cryptocurrency we really need.
Let’s take a look at some crucial arguments in favor of the idea that Bitcoin is the only cryptocurrency you really need.
Bitcoin to survive the crypto crash
While BTC also dropped during the last days the depth of its dive was nowhere near what its competitors went through. ETH, SOL, ADA, DOGE and other altcoins have suffered bitterly. But nothing compares to the tragedy that almost devastated UST and LUNA. Both tokens have fallen victims of a coordinated attack. It is now obvious that algorithmic stablecoins with Proof-of-Stake model are pretty vulnerable.
It’s clear that altcoins and stablecoins undermined crypto market’s reliability. And it’s hard to say when people will start gaining faith in cryptocurrencies again.
But Bitcoin is a different animal.
We’ve seen Bitcoin price volatility due to various factors, ranging from Federal Reserve’s panicking statements to general investor’s fear.
But we haven’t yet seen Bitcoin blockchain vulnerabilities or any other compromises that could cast a shadow on the future of the most influential cryptocurrency.
Just think of this, among all the negative things you’ve heard about crypto market lately there was not a single bad news about Bitcoin directly.
How about Bitcoin price volatility?
Bitcoin price volatility is a separate issue. Bitcoin a rather young financial asset that is often shaken when traders from other industries come and try to wield BTC as a ordinary stock or commercial paper. That is very likely to end rather soon as the result of the crypto crashes just like the one we just saw.
The “guest” investors will run away to play some place else, while the Bitcoin enthusiasts will keep building the world of decentralized finance.
Even now, during the current crypto crash Bitcoin has shown ability to withstand all kinds of troubles.
For the last 7 days, BTC dropped 18% while Ethereum and BNB lost 25%, XPR and ADA dropped more than 30%, Solana lost 40%, etc.
This is not mean that Bitcoin would hold its price at any time, but it proves some crucial consistent patterns: despite all the problems with transaction speed, low efficiency, and DeFi utility absence, BTC is still the largest decentralized platform that is least affected by market fluctuations.
These days Bitcoin fell below the $26 000 mark for the first time in 16 months. But considering more than $200 billion in entire market sell-off in a single day, it’s still kind of a good indicator.
In terms of market capitalization, Bitcoin had more than $680 billion as of May the 7th. And it dropped to $500 billion on May the 12th. At the time of writing Bitcoin is traded at $29 400, and its market cap rose to $561 billion.
Is Bitcoin really more secure during the crash?
“A proof-of-stake coin just halted its blockchain because due to the price crashing it became much cheaper to make a 51% attack. Bitcoin doesn’t have this problem. Remember to stick to only Bitcoin and never buy any altcoins as they are scams. Bitcoin will keep you safe”, – one crypto enthusiast wrote on Reddit.
After UST&LUNA crash Terra platform developers halted its blockchain twice in less than a day. It means that Terra (UST) stablecoin and the affiliated Luna token stopped processing new transactions.
“The Terra blockchain has officially halted at block 7607789. Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come”, – they wrote on Twitter.
The reason for blockchain halting is a sharp drop in the value of UST and LUNA. In a few days LUNA price dropped from $65 to $0,0002. The UST ‘stablecoin’ is now traded at 17 cents.
Like many other altcoins, the Terra platform Terra uses a Proof-of-Stake consensus mechanism that requires the majority of LUNA tokens to be staked with ‘trustworthy validators who secure the network and process legitimate transactions’.
Governance attack risk
This is a very important thing to understand when considering Bitcoin potential crash.
With a hugely decreased Terra market capitalization, somebody could buy a major portion of LUNA with depressed prices, delegating it then to malicious validators. Such illicit activity is called ‘the governance attack’ and it can potentially steal all the last assets held on Terra.
“That’s what they’re trying to prevent by pausing it. I don’t really know what pausing it is going to do, because once you shake the confidence in this thing, it may take a little while, but eventually it goes down to zero,” – said Alex Johnson, author of the Fintech Takes newsletter.
Terra developers also deployed an emergency upgrade to disable new delegations for its validators. The blockchain was restarted after two-thirds of the validators came back online.
Actually, a governance attack in proof-of-stake (PoS) blockchains is the same thing as a 51% attack in proof-of-work (PoW) blockchains.
The difference is PoS governance attack needs a single party to control at least 50% of a network’s tokens for having majority voting power in the ecosystem. And the PoW 51% attack needs a group of miners to control more than 50% of the aggregate hash rate.
PoS vs PoW problems
A bunch of altcoins is based on PoS protocol such as Solana, Cardano, Celo, Mina, and lots of others. Ethereum has been eyeing the switch to Proof-of-Stake for years now.
These blockchain have native tokens that can be staked to confirm transactions and support the chain working through validators. You can become a validator after buying some quantity of tokens. For example, to become ADA platform validator you have to have at least 300 ADA tokens.
Instead, the more energy-consuming PoW model needs computing power to process payments and hold the blockchain working. Miners are playing the validators’ role, and nobody can gain control of the network even after buying a major portion of its tokens.
Moreover, PoS blockchains are far less decentralized as they have a low entry barrier for validators.
That means PoS platform developers, who typically control large amounts of tokens, will always have control of the network. And the overall network run will always heavily depend on them.
These developers and validators can be bad actors who are withdrawing their assets during the harsh bear market.
This is exactly what happened to UST and LUNA tokens. As the attack came and the prices went down the validators started panicking. And rushed to withdraw theirs assets, thus killing the network.
Bitcoin simply couldn’t be attacked this way
Due to its total decentralization and a highly effective PoW mechanism Bitcoin is invulnerable to this kind of attack.
Absence of validators is a blessing. Just look at the correlation between Bitcoin prices and the mining hash rate. Right, there is no correlation.
Because people keep mining regardless of what’s happening on the market. And the transactions keep getting properly validated. Even if substantial quantity of miners suddenly decide to quit mining, dropping the overall network hash rate, it won’t affect the security of the blockchain.
Some transactions would just take a while. That’s it. No Bitcoin crash would come. There is no possibility – or at least we don’t see one now – for attackers to take down the Bitcoin network just as they did with UST.
Bitcoin vs altcoins during the crash
Given the fact that BTC is the largest and the most capitalized crypto, some experts say that the only reliable way to earn on crypto is Bitcoin’s long-term investment.
If you look through the top-10 cryptos during the last years, you would see that all the altcoins permanently appeared and disappeared. And their developers always promised the great future of BTC or ETH ‘killers’.
The basic rule is simple: if you believe in crypto – you should believe in Bitcoin.
“This is another important difference between a network like Terra and Bitcoin: while in the former a minority of entities that can vote on things like halting the network, Bitcoin’s true decentralization makes it immune to the whims of any specific group”, – Bitcoin Magazine writes.
So as any other alternative cryptocurrency projects or altcoins are still at the early experimental stage, Bitcoin remains the only tested and widely used peer-to-peer digital money. As the Lord Satoshi intended.
BTC decentralized nature to withstand the crash
Built on cyberpunk ideas, Bitcoin was about to bring the community the anonymous and convenient world of digital money. Mathematical technology behind it had to impact the power of traditional financial systems.
As these ideas with BTC itself grew in popularity, alternative forms of cryptocurrencies started to compete with Bitcoin.
But the fact is Nakamoto designed the Bitcoin PoW protocol with real-world costs and authority to miners. Instead, most popular altcoins started drifting to the PoS side, where participants can become block creators just by locking their holdings of the given project’s native token.
The problem is PoS cryptos can’t encourage the biggest stakeholders to behave honestly, as any time they can take totalitarian actions like halting block production or do governance attack.
Bitcoin miners instead are having kind of p2p-responsibility between them, as they maintain the network to operate stably. The more stable network would be – the more price BTC would get, and the more money miners would actually earn.
Surely, BTC whales can hugely impact the value while withdrawing large amounts of tokens. But no one bad actor can actually halt the network like it was with Terra blockchain.
Is Bitcoin the only cryptocurrency you need?
Well, a lot of crypto enthusiasts think so.
But still, as any altcoin, Bitcoin itself is early-stage technology in terms of wide adoption, crypto regulation, payment convenience, transaction speed, and so on.
But things like Lightning Network Bitcoin payment protocol can actually change the game.
Just wonder what if BTC payments would be as easy and quick as traditional VISA transactions within your mobile banking.
The Lightning network can also reduce the BTC payment fees and finally make it the ideal decentralized digital currency. But firstly it has to do something with its unfriendly online ecosystem that raises the chances of token stealing.
According to recent data from Glassnode, nearly 40% of Bitcoin holders have lost money on their investment during the last market drop.
Will it crash the Bitcoin network? Probably not.
Will it make the community turn to total decentralization again? Surely it will.
Just think of the mesmerizing fact that most of us knew nothing about Bitcoin just four or five years ago. And these were the good old days for the enthusiastic and true decentralized blockchain community.
Do you really believe that this could end sometime?
If no, then stick to Bitcoin as it is the only crypto to survive the crash. And thus it might be the only cryptocurrency you need.
Sources: Protocol, Finance.Yahoo, Nasdaq, Bloomberg
