Can Bitcoin Bull Run Without Scaling?

Bitcoin’s network has been operating near full capacity for now two years despite its price falling for much of that period.

Not always, transactions have halved at times for the past two years, but if we took off any visual clues from the above chart and the one below, spot the difference between bitcoin transactions and its price:

This correlation between price and transaction numbers has been noted for years, with the reason self evident. The more people have bitcoin, then all else being equal, the more the network is used.

Usage here doesn’t necessarily mean buying coffee. The simple exchange of ownership requires usage of the network.

The above chart is starker, and more revealing. While the transaction number shows what has been given access to the network, the above chart shows what is waiting for inclusion.

Waiting queues are also an indication of usage, with the above chart showing a peak in May 2017, when price jumped to $3,000 and then plunged to $1,800.

There’s a second peak in August. Price here rose to $4,500 then plunged in a mirror of the peak to around $3,000.

Then obviously there’s the peak and we all know what happened there. Showing thus a pretty clear correlation.

This chart is bitcoin fees, with a peak of circa $15 million a day showing clearly why miners were persuaded by this idea of limiting capacity to the point they signed an agreement to run no other client but Bitcoin Core.

Those days were short lived however, with bitcoin’s price plunging precisely at the peak of fees and that of the mempool.

Here another useful chart is from the second biggest public blockchain because the above peak was in December, while in ethereum it was in January:

At the time suggestions were ethereum can handle 14 million transactions a day or more. So with bitcoin reaching peak capacity, much value moved to eth, but eth miners too – some of them bitcoin miners also – limited capacity. So giving us the above peak in transactions and price.

The curious thing about the above chart is that transactions have remained stable for quite some time, but price has been falling.

The reason is obvious: inflation. Just as with fiat money growth is necessary to keep the system going, so too in bitcoin and ethereum growth is necessary to cover the new supply from miners who usually insta dump on the market the blocks they find.

So transactions have to increase for price to rise, with transactions here used as a proxy for usage and thus the increase in bitcoin ownership, but with no room for such transactions to increase, can price rise?

Well, that’s the million dollar question because if we look at the mempool chart for bitcoin, it does have room to rise 10x to the peak.

On the other hand before it reached that peak the network had not been running at full capacity for years and potential bitcoin users were promised a solution in the form of the Lightning Network.

In other words, just as with eth’s 14 million transactions a day, here too they were lied to and thus perhaps made them bear the ever increasing fees and more importantly, the narrowing of the target market and thus the narrowing of the room for growth.

Now many of them have seen themselves the limited capacity, and they have clearly seen the utter uselessness of the Lightning Network, so getting them to climb that mountain again may be not as easy.

In ethereum the new carrot is sharding, which of course is weeks not months away with these being Lubin weeks, but this chart tells you all you need to know about ethereum’s two years of non action and their two weeks:

Only fools think they can fool, with this ugliest of charts proving what needs not proof.

The absence of on-chain capacity does not mean the absence of bitcoin transactions, it’s just a different sort of transactions. PayPal like transactions.

As was argued when the arguments were made in 2015, limiting bitcoin to 1MB leads to bitcoin banks which return it all back to where it started.

Bakkt, the much hyped platform from NYSE’s owners and a strong proponent of this capacity constrain, has revealed the solution to the capacity constrain.

Like a bank they basically place themselves in the middle of everything whereby you deposit bitcoin to them and then through their centralized database all transactions happen which no one can see, but Bakkt.

Bakkt they call themselves but whether they are backed is unknown for they have not revealed their bitcoin address.

They say real bitcoin is being exchanged but whether that is the case no one quite knows, and as MT Gox showed, no one can know.

If you recall MT Gox made a famous 4242 transaction back in 2011 to prove solvency. Three years later they were bankrupt for the transaction proved only what they owned, not what they owe.

It is of course because of this difference between owned and owe that the banking crisis led to some countries going bankrupt, and it is to remove that difference that bitcoin is a thing at all, for bitcoin is the bank, the blockchain is the accounting department and all the rest.

You take off the blockchain payment system and put it into some Bakkt database under the excuse of the system being unable to handle mere bytes, and you have no bitcoin anymore.

No bitcoin as the solution that was proposed. There is still bitcoin and in this controlled version the unique selling point is the 21 million bitcoin limit.

Fools as they are even publicly want to get rid of this limit, but that’s what only fools believe. They’re clearly arguing the choice is either capacity or the 21 million limit because they know fully well if there is no capacity that limit can be subverted not publicly, but privately. While, if capacity is increased, they are basically implicitly threatening they will launch an official client that gets rid of the limit with the spurious argument of subsidizing miners to justify it.

To not expect a counter-revolution is foolish. The elite won’t be idle, the CFTC commissioner said . The problem is they’re mistaken, from their own point of view let alone anyone else’s for if we don’t dance peacefully, they will dance.

No one can control eight billion people, but reason. No one can control bitcoin either, but reason. Reason naturally says there must be a progression of a peaceful, incremental, and of a voluntary sort. In its absence, if we let them down, what gives them hope?

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