Bitcoin, the most important cryptocurrency of the moment, has a 836 billions USD market cap, with a daily transaction volume ofabout 84 billion USD.
Recently, Elon Musk engaged in some weird interaction with the crypto world. First, he bought (well, Tesla did, technically, but it was really his decision) about 1.5 billion worth of Bitcoin. After that, he announced that Tesla will be accepting Bitcoin as a currency for its cars. And then he switched, refusing Bitcoin, on the basis of some yet-to-be-proved environmental concerns, namely that Bitcoin is consuming a lot of electricity. A bit ironic, knowing that his cars are also consuming a lot of electricity to recharge. Doh.
Anyway, at some point in this dance, he also got entangled with a meme coin, Dogecoin, literally a clone of Bitcoin, created on a whim. Elon claims this is the “currency of the people”, and that he works closely with the developers of the token to make it “better” and “scalable”. The quotes are for people who are new to the crypto world, signaling that these “better” and “scalable” approaches have been tried before in the niche, by forking Bitcoin in a huge string of copycat blockchains, from Bitcoin Cash to Bitcoin Diamond, all claiming to solve these problems, all failing lamentably a couple of months, or years, at most, after their launch.
But this time we’re witnessing an interesting clash. It’s not about some guys trying their luck with a Bitcoin fork. It’s about the richest person on Earth, with a net worth almost double than the daily Bitcoin transaction volume. To put this in perspective, if Musk liquidates half of his assets, suddenly having 75 billion to spend, and he decides to spend all of this on Bitcoin, he will (almost) cover the entire market for a day. Allegedly, he will be able to own about 9% of the entire supply (it’s way more complicated than that, and in practice this will never happen, on the contrary, the prices will quickly surge if there would be such a big buyer, but let’s pretend this for the sake of the argument).
“Antifragile” means that a product, or a process (or, by extrapolation, a being) becomes better after each significant stress they are able to overcome. In a way, “antifragile” means that you thrive on chaos, the more you’re subject to pressure, the more you evolve and expand.
Bitcoin has a long history of being antifragile. It has resisted numerous attacks, a lot of backlash and rejection, and a few major bull / bear cycles, in which it “crashed” dramatically.
Elon Musk overcame quite a few problems too. At some point he almost sold Tesla to Google, but then he somehow recovered. He also faced a lot of criticism and rejection, and he also emerged stronger after that.
That’s why this clash is what I call “the ultimate” antifragile test for both.
Now, what could happen? Let’s draw some scenarios.
Bitcoin Loses To Dogecoin, Elon, Dogecoin Win
That’s the scenario Elon is trying to push forward right now. His relentless support for Dogecoin signals that he doesn’t believe Bitcoin will actually function as it claims. He may, or may not be true. I don’t rule out this possibility (we’re just drawing scenarios, remember?) but here’s what I think will happen if Dogecoin overcomes Bitcoin.
There will be an insane amount of power in the hands of a single person. Dogecoin may become usable and may gain in adoption to the point it gets in front of Bitcoin, but this will be done at the expense of its decentralization: it will always be “Elon’s coin”. Bitcoin also has a charismatic founder, Satoshi Nakamoto, but his influence, somehow counterintuitively, is enormous because he’s no longer around. Satoshi Nakamoto is frozen in time to the moment he founded Bitcoin. He’s not a person, he’s fused with the token and he cannot be taken out of it anymore. Whereas if Elon becomes the Dogefather, he will be subject to change, as any living human being, and every tiny change will swing the markets. Ironically, because he will still be alive, Elon will diminish, in time, the token’s credibility.
Bitcoin Proves Elon Wrong, Musk Loses Reputation, Dogecoin Back To Memes
The other scenario is the one in which Elon fails lamentably, Dogecoin can’t take over (lack of community support, or, most likely, major dev blunders resulting in hacks) and Bitcoin surges once again to new heights. This happened before, in 2017, John McAffee tried to create and support a few tokens that “may replace” Bitcoin and it didn’t went well. McAffee is currently waiting extradition to US in a Spanish prison, because he’s investigated by the SEC for market manipulation. If Elon will share the same fate, then the entire empire he’s built will crash.
Dogecoin will get back to the meme coin status, and a handful of core believers will still exchange tokens between them, for pizza or beers.
A Non-Binary Outcome
As strange as it may seem, there is also a third, non-binary scenario, in which both are getting out in more or less one piece, only with a little bit of collateral damage. If you know a little bit of quantum physics, then you understand how things can at the same time be, and not be, so a non-binary outcome is actually plausible.
The collateral damage in the case of Bitcoin would be negligible. Bitcoin hodlers are used to massive crashes so for them this may be just another “market correction”.
In Elon’s case, collateral damage may be a dip in his companie’s market value, quickly offset by some major breakthrough in one of them (he is well positioned now with all, so any Neuralink, Space X, Tesla or Starlink advancement will do it).
In any of these scenarios, one thing is sure: there will be a lot of popcorn sold. I know I’ll be influencing the supply of popcorn big time during this test, because this is a time to watch, not to trade.