The Truth About Bitcoin: A Comprehensive Thread Debunking Common Myths

This last week has revealed that despite growing institutional acceptance, Bitcoin remains highly misunderstood:

- Jamie Dimon claims Satoshi controls Bitcoin
- Vanguard claims bitcoin is too volatile and uninvestable
- UBS claims Bitcoin has no real world applications

In this thread, I revisit Bitcoin's most common misconceptions.

We are still early. Claim: "Bitcoin is backed by nothing."

Counter-claim: Bitcoin is backed by the most powerful computing network in the world.

At 500 exahashes/second, the level of computational power dedicated to “backing” Bitcoin exceeds the combined capabilities of the world's largest computing networks. This computational power isn't centralized in one location or controlled by a single entity. It's distributed across a global network, ensuring decentralization and resilience against attacks or failures.

Miner backed > Government backed

Bitcoin closed the month of January up ~40%, its best performing month in 2+ years.

It is now coming up against its 200 week moving average.

Is the bottom in?

More charts from January's edition of the Bitcoin monthly: ark-invest.com/crypto-reports… For the first time since dropping below its market cost basis last June, bitcoin is now back above it convincingly in January, marking the second longest period below its general cost basis in history.

Bitcoin has experienced five price declines of over 75% and has still outperformed equities, bonds, and gold. Bitcoin is up ~50% since its November 2022 bottom.

The most recent drawdown from Bitcoin's high is the 5th largest and 2nd longest in history.

1/ For the first time in history, bitcoin is less volatile than both the S&P 500 and Nasdaq.

The last time volatility was this low, bitcoin rose from $9,000 to $60,000 in less than a year.

New edition of The Bitcoin Monthly is out, led by @dpuellARK

ark-invest.com/crypto-reports… 2/ For the third month in a row, bitcoin continues to trade between support at its investor cost basis ($18,814) and resistance at its 200-week moving average ($23,460).

Given the tight range, an expansion in volatility should be expected soon.

1/ Bitcoin's short-term holder cost basis has crossed below its long-term holder cost basis for only the 4th time ever.

This cross historically marks a cyclical bottom.

New edition of The Bitcoin Monthly is officially out, feat guest author @WClementeIII
ark-invest.com/crypto-reports… 2/ Bitcoin is still trading between its investor cost basis (~$19,000) and 200 wma (~$23,500).

As strong holder behavior battles a weak macro environment, resolution to either side will play a significant role in bitcoin’s short- to mid-term outlook.

1/ Bitcoin has reclaimed its 200-week moving average after breaching it for only the 7th time in price history.

Bitcoin's 1-year return after reclaiming the 200 WMA is on average ~240%. 2/ Market price is now trading above market cost basis after briefly breaching below investor cost basis.

This behavior appears more comparable to the sell-off at the peak of the COVID crisis than it does the 2018 bear market.

1/ Bitcoin is trading below its 200 WMA and short-and long-term cost bases for only the fourth time in price history.

These levels have historically marked generational bottoms. 2/ Following Terra’s collapse, leverage has unwound across the entire ecosystem, catalyzed by a liquidity crisis from Celsius and the insolvency of 3AC.

Excited to introduce the first official issue of “The Bitcoin Monthly”

Starting this month, ARK will be publishing an in-depth report covering Bitcoin’s market action and sharing where we think the market's headed.

Here are the major highlights from this month’s report: Bitcoin prints 9 consecutive weekly candles for the first time in history.

The price of a single bitcoin could exceed $1 million by 2030.

We are still early. If Bitcoin does hit $1 million, it will still only represent a fraction of global asset values.

A multi-chain world is inevitable.

Most people don’t care about decentralization, self-sovereignty, or privacy.

They care about getting rich.

Some chains will exist solely because of raw greed and self-interest. That being said, crypto has captured an unprecedented amount of mindshare.

Innovation is happening at insane rates.

If you still think that mindshare will be dedicated to 1 or 2 chains (let alone 1 or 2 use cases) you are not paying attention.

Analyzing BTC's price action without using on-chain data is like valuing a company without using its financials

On-chain data is BTC's ultimate valuation tool

Just published “A Framework for Valuing BTC” w/ @kenoshaking feat 5 new ARK on-chain indicators
ark-invest.com/articles/analy… 1. Investor capitalization

Investor cap is a good gauge of capitulation during bear markets.

By removing the outstanding value paid to miners (thermo cap) from overall cost basis (realized cap), we can assess the fair value of bitcoin at the bottom of a market cycle.

Tell me your account got hacked without telling me your account got hacked.

https://twitter.com/elonmusk/status/1392602041025843203

Surprised that Elon of all people is being retrospective as opposed to prospective. A world with bitcoin is a world that, at equilibrium, generates more electricity from renewable carbon-free sources.

1/ Bitcoin provides native auditability the likes of which no traditional asset has ever seen.

This allows it to be analyzed in more depth than is possible for any traditional asset.

Just published part 2 of a 3-part series w/ @kenoshaking & @glassnode:
ark-invest.com/articles/analy… 2/ In this series, we introduce a framework to analyze bitcoin’s fundamentals. We characterize the depth with a three-layered pyramid, the lower layers serving as building blocks for the higher layers.

1/ Bitcoin critics continue to assert that mining is wasteful and disproportionately damaging to the environment.

Contrary to consensus thinking, we believe the impact of bitcoin mining is a net positive for the environment.

Here's why: 2/ First, proof-of-work mining is critical to Bitcoin. In the Bitcoin network, trustworthiness is protected by computation, and mining is what gives Bitcoin its ability to coordinate trust and facilitate the transfer of value without relying on a centralized authority.

1/ Interesting that treasury secretary @JanetYellen has stated concerns that cryptocurrencies are being used mainly for illicit financing on the same day that Chainalysis reported a dramatic fall in cryptocurrency transactions associated with criminal activity. 2/ As ARK has noted in the past, cash transactions account for a larger share of illicit activity than do cryptocurrency transactions, on both absolute and relative terms.

1/ Bitcoin has blown past all-time highs, yet skeptics continue to claim it has no fundamentals.

In reality, Bitcoin has extremely strong fundamentals... if you know where to look.

Just published part 1 of a 3-part series w/ @kenoshaking & @glassnode
ark-invest.com/articles/analy… 2/ Investors increasingly will appreciate Bitcoin's merits through the lens of a completely new framework. While conventional analytical frameworks are not suitable, Bitcoin offers a unique set of tools that stakeholders can leverage to assess its fundamentals.

Bitcoin is the most compelling monetary asset to emerge since gold.

As the birth of a new asset class, it could scale more than an order of magnitude to the trillions during the next decade

Part 2 is officially here: Bitcoin As An Investment
@coinmetrics
ark-invest.com/white-papers/b… Five years ago, a $10,000 investment in bitcoin would have delivered a 119% CAGR and would be worth roughly $500,000 today.

In fact, during any yearly holding period since inception through September 1, 2020, bitcoin’s return has been positive, significantly so in most case.

1/ Bitcoin calls into question the very basis of economic organization. No other breakthrough in history will contribute more dramatically to the evolution of monetary systems.

*Just published* w/ @coinmetrics
Bitcoin: A Novel Economic Institution
ark-invest.com/white-papers/b… 2/ The promise of Bitcoin is best understood in relation to traditional financial systems, which rely on
centrally controlled institutions that enforce the rules, record-keeping, and adjudication of the system.

Eleven years after Bitcoin’s creation, major financial institutions STILL dismiss it based on outdated arguments:

“bitcoin is too volatile”
“bitcoin is a bubble”
“bitcoin is for criminals”
“bitcoin is wasteful”

Here's why they have it wrong:
ark-invest.com/analyst-resear… Claim: bitcoin is too volatile
Counter-Claim: bitcoin’s volatility highlights the credibility of its monetary policy

Bitcoin's price is a function of demand relative to its scarce supply. In contrast to modern central banking, it does not prioritize exchange rate stability.

1/ The Bitcoin mining FUD is back.

Here's a thread on a few (of many) reasons why Bitcoin mining is *not* doomed: 2/ Bitcoin mining has become extremely competitive on two levels:

1) Hardware manufacturing
2) Mining as an operation

1/ Before the creation of Bitcoin, a non-government backed money seemed unattainable.

Fast forward to today.

In just 11 years, Bitcoin has become the closest thing the world has seen to a free market monetary system. 2/ “In the 2000 yrs we've used coins and money, we've never been given a chance to find out what the best money could be” - F.Hayek

No longer is the State issuance of money depriving us of finding out what a good money is.

Bitcoin is the experiment that allows us to experiment.