Next, translate 3-2
Topic: The 2022 Crypto Thesis - Key trends, people, companies, and projects to watch in the crypto space, along with predictions for 2022
Original report download link: https://messari.io/pdf/messari-report-crypto-theses-for-2022.pdf
I think the probability of ETH "flipping" next year might be 20%. Not because ETH is money, regardless of what Sotheby's says.
If ETH does successfully flip BTC, it won't be because it's a superior "currency," but because the market values the world's most unique user-owned computing platform and its earnings and growth potential more than digital gold. In other words, we will view BTC vs. ETH like M0 vs. Google.
Translator's note: Base money (or M0) is the total amount of money in circulation with the public or held as reserves by commercial banks at the central bank.
This is not my original idea. Arthur Hayes, the founder of BitMEX, broke this analogy in an article about flipping the debate, saying:
ETH cannot simultaneously be the world's best virtual computer and the world's best money.
The largest crypto monetary network (BTC) should be larger than its largest distributed technology "company" (ETH).
That is to say, it is possible to believe that "cryptocurrency" as a whole will outperform "Bitcoin" (i.e., BTC’s dominance will decline), while Bitcoin still maintains its position on the global leaderboard. For competitive Layer 1 computing platforms, Ethereum is a more aggressive target compared to Bitcoin. Ethereum's scarce resource is the limited capacity of its global settlement ledger, and 2021 proved how quickly other Layer 1 public chains can siphon off demand for crypto transaction settlements when Ethereum's ledger becomes too expensive.
On the other hand, Bitcoin's scarce resource is its simple monetary Meme. Its pure "money" competitors are less intimidating: Dogecoin, Shiba Inu, Bitcoin Cash, Craig Wright Cash, and their post-fork products have even less to offer.
Maybe you love Dogecoin! Many savvy investors do, like Su Zhu, who fundamentally likes Doge for its virality, community, humor, and unserious user base, pushing memestocks to the moon in 2021.
I get this argument, but it falls apart in one key way: jokes go stale, and even early holders will eventually realize they're sitting on real gains and find a cheaper joke. Reflexivity isn't fun on the way down, and when the trend reverses, there won't be institutional buying for cute Shiba Inus. An unserious user base may also mean many users panic after getting their tax forms and realizing the importance of their tax obligations in Q1.
Because, Bitcoin investors aren't new to capital gains taxes. Many Dogecoin bettors probably are new to capital gains taxes.
Of course, there are two other proof-of-work coins in the money conversation — Zcash and Monero — but holding them requires a long-term commitment to true peer-to-peer private transactions and a passionate embrace of discomfort. They might be assets you want "just in case" your country collapses and you need to flee with a bug-out bag and hardware wallet.
But the smartest thing I’ve done is reversing my dummy-dum-dum "super ZEC long" trade in December 2020 and re-allocating it into ETH where it belonged. I'm tearing up writing this, but Multicoin was right that privacy as a feature has a future, and I'd rather make money than be right. ZEC remains 1% of my portfolio, I still like Zooko, but it's no longer in my top 5 (other coins have lapped ZEC. Not my fault!)
Outside of Ethereum, Bitcoin really doesn't have much competitive flippening competition, but ETH itself must also be careful. In 2021, Bitcoin’s market dominance fell from 71% to 42%. But ETH’s smart contract platform dominance also slipped from 80% to 60%, and more capital may flow out of ETH toward its new Layer 2 Rollup "allies" launching at the start of 2022.
Cryptocurrencies might have higher upside, but there was nothing wrong with owning General Electric during the internet boom. GE stock went from $100 in mid-1999 to $450 by mid-2000, then back down to $185 by mid-2003. Within four years, it was still up 85% after its "crash" compared to before the run-up in the market. If Web3 reaches the madness of Web1, this is likely Bitcoin's trajectory. Would you hate it if BTC goes from $275k to $125k next year?