You grow with your tasks: Why Bitcoin is antifragile
Friedrich Nietzsche already wrote: “What doesn’t kill me makes me stronger”. You could also say that we grow with our challenges. Behind this admittedly tasteless phrase is a fundamental truth that Bitcoiner is currently relying on more than ever: Bitcoin’s anti-fragility.
Antifragility means bestselling author and star economist Nassim Taleb a concept that describes the opposite of fragility. Not robustness, but antifragility is diametrically opposed to fragility. Because what is robust can only withstand resistance and setbacks, whereas antifragiles grow in their tasks. In other words, antifragile systems come out of every obstacle stronger than they entered.
It is a non-trivial consideration that authors have been acting on Bitcoin as such an anti-fragile system for some time. After all, every drop in the course is followed by a smug “I told you so” by Bitcoin skeptics, such as gold advocate Peter Schiff . However, if Bitcoin were an anti-fragile construct, falls in prices would not weaken Bitcoin, but strengthen it. A hypothesis that can be subjected to an empirical test.
Apart from the violent rash in March of this year in the wake of the Corona crisis , there is a clear trend: Bitcoin’s volatility is decreasing. Since one of the central functions of the digital currency is that of a means of payment, falling volatility indicates increasing suitability as actual money. How can this be explained?
As a grassroots movement, BTC is still clearly retail-oriented. This means that, unlike in the traditional financial market, it is not institutional but private investors who dominate the market. An increasing proportion of these private investors should fall into the Hodler category. These are investors who believe in Bitcoin’s value proposition and are not interested in taking short-term profits. Every time a mini bubble bursts on the crypto market, BTC ownership is transferred from Hodler to short-term, profit-oriented investors.
This thesis also supports the data situation. Hodlwave, for example, shows that Hodler’s share of the total volume of the crypto market increases over time.
As a decentralized grass root movement, BTC has no leadership figures. According to Bitcoin’s advocates, this is not a disadvantage, but one of its key strengths. The more decentralized, and there is agreement among Bitcoiners, the better. Participation in cryptocurrency # 1 is voluntary; Anyone who decides to buy makes a clear decision to exchange fiat money such as euros or US dollars for a decentralized project with an uncertain outcome.
In contrast to participating in the traditional fiat money system, participating in the Bitcoin system is completely informal. And this is where the decisive advantage lies: Whoever has skin in the game suddenly has a tangible monetary interest in Bitcoin not failing. The greater the monetary value stored in BTC, the greater the interest in Bitcoin’s success. Many Bitcoiners continue to knit this concept of anti-fragility at a time when BTC is becoming a serious competitor to government money. Then, according to the argument, there should be enough decision-makers who are already undercover bitcoiners so that opponents for state attacks can no longer find a majority.
Some may still remember the 2008 financial crisis. Banks were said to be systemically important and should not fail under any circumstances. Back then, decision-makers justified the bank bailout with the systemic relevance of these credit institutions. And this reveals the crucial difference between the current financial system and Bitcoin: While the fiat money system is always on the brink in the event of crises, i.e. is fragile, the concept of systemic relevance does not exist in the Bitcoin cosmos.
On the contrary, the failure of exchanges may be painful for the individual investor who suffers the loss of crypto assets. At the macro level, however, every failed crypto exchange makes room for a better market participant. Even the legendary case of Mt.Gox, one of the largest Bitcoin exchanges, has never brought BTC to the brink of failure, although some 650,000 BTC have been lost as a result.
Anyone who does not want to buy the skin-in-the-game argument and believes in a possible BTC ban by the state should once again be reminded of the anti-fragility. Because even authoritarian regimes like China fail to reliably prevent Bitcoin mining or trading. China-FUD has therefore already found its way into the linguistic usage of the scene as a winged word — and is increasingly laughed at. So far, Bitcoiners have always found a way to circumvent government attacks.
The ruling by the Indian Constitutional Court, which has annulled the India Ban , is the latest example of the steadfastness of the Bitcoin community.
Incidentally, the current development on the Bitcoin market is another clear signal for antifragility: Instead of following the current market trend (namely downwards), BTC continues to follow the predictions of the stock-to-flow model — as if nothing had happened.