27.02.2024 – 10:07

Bitcoin and the importance of conversion points

Bitcoin recently broke through the 50k line, at least in US dollars, and the community is celebrating. Bitcoin means a lot of different things to a lot of different people. It enables portable savings, censorship-resistant global payments, and immutable data storage. It’s more than just a price on a chart; it’s an open-source network with millions of users, thousands of developers, hundreds of companies, and several ecosystems built on top of it.

The following 5 indicators are important for measuring bitcoin's success:

Market Cap and Liquidity (discussed yesterday)

Number of Conversion Points

Technical Security and Decentralization

Quality of the User Experience

Legal Acceptance and Global Recognition

Yesterday, we were looking at market cap and liquidity. Both components are interrelated.When bitcoin had thousands of dollars worth of trading volume per day, someone couldn’t put a million dollars into it, even spread out over weeks, without drastically moving the price. It wasn’t a big and liquid enough market for them yet.

And then, when bitcoin had millions of dollars worth of trading volume per day, someone couldn’t put a billion dollars into it, even spread out over weeks. I often hear the argument, Who will buy bitcoin when it is over $100.

So, who would buy bitcoin when it’s over $100k or $200k per coin? Entities that can’t really buy it until it’s that big is who. And at $100,000 per bitcoin, each sat is worth a tenth of a cent.

Let's look at the number of conversion points today.

Number of conversion points and why they serve as an indicator of Bitcoin success

Bitcoin has gone through a number of narrative transitions over its 15-year lifecycle, although the funny thing is that virtually all of them were discussed by Satoshi Nakamoto, Hal Finney, and many others back in 2009 and 2010 on the original Bitcoin talk forum. But since then, the market has bounced around to emphasize different use cases of the network over time.

A big narrative that bounces back and forth in the Bitcoin ecosystem is whether it’s a payment method or a savings method. The answer is both. Nakamoto’s original whitepaper was about peer-to-peer electronic cash, although in his early posts he also talked about central bank monetary debasement and how bitcoin is resistant to that due to its fixed supply (i.e., useful as savings). Money does serve multiple roles, after all. Because Bitcoin is mainly designed as a low-throughput network (which maximizes decentralization), it primarily serves as a settlement network. Actual day-to-day coffee-scale transactions need to be done on higher layers of the network.

Bitcoin’s ability to be sent from any internet user to any other internet user in the world is an essential part of what makes it useful. It provides the one holding it with the capability to make permissionless, censorship-resistant payments through points of friction.If people didn’t want to hold it and instead just converted back and forth from fiat currency to bitcoin briefly to make settlements or payments, then that would add all sorts of frictions, costs, and external points of censorship for the network. Paying with bitcoin or receiving payment in bitcoin works best when you actually want to hold bitcoin for the long term as well.

Want to learn more? Join our SwissFinTechLadies Angel Training. Bitcoin is part of the curriculum. https://swissfintechladies.com/angel-training/

Also read our next chapter on bitcoin, which is about technical security and decentralization, on Presseportal.

#blockchain #bitcoin #FIAT #currency #permissionless #opensource #KPI #marketcapitalization #liquidity #conversionpoints #security #decentralization #userexperience #legalacceptance #globalrecognition

Investors club https://emotional-agility.dg1.com/vc4diversity/pages/memberships

Webseite https://swissfintechladies.com/

Karen Wendt

President of SwissFinTechLadies