Executive Summary
Teza CEO/CIO Misha Malyshev makes a case for why Bitcoin will likely be surpassed by other cryptocurrencies and go to zero in a few short years. While some crypto enthusiasts see Bitcoin as the uncorrelated asset of the future, Misha argues that Bitcoin is likely to become a mere museum exhibit.
Introduction
For many, an investment in cryptocurrencies has become synonymous with investment in Bitcoin. The idea of investment in Bitcoin (BTC), while initially unnerving for the general public, has now entered the basic rhetoric of financial pundits and investment gurus. Bitcoin has even started to appear on Markowitz’s diagrams alongside stocks and bonds. The only question seems to be: what is the optimal allocation percentage?
Bitcoin seems like a logical entrypoint to crypto investing. Bitcoin is the original cryptocurrency with:
• About $1T market cap
• Stellar (though volatile) historical performance
• Fully decentralized blockchain with the longest (13 years) track record of all cryptocurrencies • A network that has never been compromised
• First mover advantage and the largest capitalization among other crypto tokens
However, an investment in Bitcoin is not the same as an investment in a broader digital asset class. While investment in a broader digital asset class – the emerging world of web3 – presents an attractive opportunity, we caution long-term investors against making an allocation to Bitcoin specifically.
The rest of this paper addresses forces of supply and demand for Bitcoin that would allow one to make projections on Bitcoin price evolution.