ETFs can stimulate adoption, but the inaugural cryptocurrency must persistently advance as a technological entity, as highlighted by Thesis CEO Matt Luongo.
Andreessen Horowitz (a16z) omits Bitcoin in their forecasts for the upcoming year’s prominent crypto trends. They are not the only ones; amid the excitement surrounding the growing ecosystems on Ethereum and Solana, Bitcoin is often dismissed as outdated, irrelevant, and unexciting.
However, overlooking this fact would be a mistake. In 2024, Bitcoin is set to make a significant comeback, for better or worse. My mixed feelings might come as a surprise. I remain steadfast in my belief in the transformative potential of Bitcoin. However, 2024 appears to be the year when this asset firmly enters the mainstream in an irreversible manner. The outcome of this transition will decide whether the vision of decentralization and self-custody of assets inches closer to reality or if the Bitcoin “brand” is assimilated as just another offering from entities like Vanguard and Amazon.
The catalyst for this shift is the imminent approval of the first spot Bitcoin exchange-traded fund (ETF) in the United States, poised to trigger a massive influx of investment into the world’s oldest cryptocurrency.
However, there’s a dilemma: the new wave of investors may believe they’ve invested in BTC while never interacting with anything that genuinely resides on the blockchain. These ETFs will represent “paper Bitcoin,” a symbol, not the actual asset, similar to how a dollar bill isn’t equivalent to gold.
For Bitcoin to succeed on its own terms, it must evolve as a technology, not just a store of value
There won’t be an apparent incentive for anyone to directly hold the underlying asset. A plethora of consumer applications will emerge, facilitating buying, selling, trading, lending, and borrowing—all through synthetic assets that never interact with the blockchain.
While “Bitcoin” thrives, the core concept of true self-custody will be rendered obsolete. How can we avoid a victory with such significant drawbacks? By providing first-time HODLers with meaningful engagement.
Bitcoin has long held the title of the largest digital asset by market cap. However, in terms of use cases and innovation, it has not been the focal point for years. Ethereum has dominated this space, recently joined by other popular chains like Solana. This perception has led many to view Bitcoin as a “finished” product—enduring but lacking in room for growth or evolution.
To succeed on its own terms, Bitcoin must transcend its role as a store of value and evolve as a technology. The groundwork for this transformation has been laid by the rapid development of layer 2 solutions, such as the Lightning Network, which has witnessed widespread adoption in the past year.
However, as Lightning demonstrates the possibilities, it also underscores the work that lies ahead. In its current state, it has notable limitations. For instance, during periods of high fees, performance experiences a significant downturn, as observed when the Lightning transaction facilitator Nostr Assets had to pause deposits due to overwhelming demand.
The reality is that Bitcoin’s existing Layer 2 solutions are not yet equipped to bring in the next billion users. The primary objective of a Bitcoin Layer 2 should be to transition Bitcoin holders into “multiplayer mode.” Users should be able to send or receive BTC seamlessly without relying on platforms like Cash App—value transfers should occur effortlessly through email or BTC-native apps such as Nostr.
While the launch of ETFs will significantly broaden Bitcoin’s adoption base, genuine success requires the underlying blockchain to be a vibrant arena of activity. It should evolve into a decentralized financial ecosystem where individuals can engage in trading, business transactions, and development. More than anything, Bitcoin as a network should foster an ecosystem where like-minded individuals can come together, trade, conduct business, and collaborate.
This reality is already evident in Ethereum, where individuals can amass substantial gains by engaging in “degen” activities. However, this is not yet the case for BTC. If the only available activity is running a Lightning node, a significant portion of the population will remain confined to a brokerage account. Bitcoin must close the gap with the thriving DeFi ecosystems present on alternative chains. The upcoming summer of 2024 should mark a season of BTC DeFi innovation.
