- The Bitcoin blockchain is gradually becoming more than just a buy and hold platform.
- Programmers are expanding their capabilities, which can lead to new demands.
- Ethereum has been following a similar trend, leading to a massive price increase in 2021, Bitget CEO Gracie Chen told Business Insider.
Bitcoin's 2024 catalyst may seem like a thing of the past, but programmers are working behind the scenes to fuel a future upswing.
Since their inception, the top cryptocurrencies have captured the market's attention as buy-and-hold assets, and this appeal as a store of value has led to explosive gains. Other than this, blockchain doesn't offer investors much.
“Despite Bitcoin's diverse use cases, it is primarily seen as a 'digital gold' to combat inflation, or as a currency alternative that allows participants to transact in a decentralized peer-to-peer (P2P) environment,” Chainalysis' March note said. “Typically, do not have It has been seen as a blockchain that can be built on.”
This puts Bitcoin one step behind certain competing networks, notably Ethereum, whose platform allows investors to freely trade different cryptocurrencies as well as invest in non-fungible tokens and DeFi.
And with Ethereum’s native cryptocurrency now approved for its own spot ETF, some analysts expect these technical advantages to spark a bull market for Ethereum.
But Bitcoin is catching up.
Programmers have been working on expanding its capabilities for years, but new momentum was generated last year with the launch of the Ordinals protocol, which finally allowed the blockchain to host digital data other than bitcoin tokens, such as NFTs.
Then came the BRC-20 token. Building on the Ordinals mechanism, this protocol allowed tokens to be minted and traded directly on the blockchain, ushering in a wave of new cryptocurrencies alongside Bitcoin.
“The Ordinals Protocol has enabled the growth of meme coins on the Bitcoin blockchain, leading to a surge in liquidity within the BTC ecosystem in record time. Since the protocol's inception, tens of thousands of BRC-20 tokens have been issued with a total market cap of over $2 billion,” Gracie Chen, CEO of cryptocurrency exchange Bitget, told Business Insider in an email.
While meme coins and NFTs may appeal to fun seekers for now, this is also good news for price-conscious investors, she said. On top of that, Bitcoin is making inroads in scaling solutions and DeFi, helping to boost trading demand.
Although key technical differences remain between Bitcoin and Ethereum, replicating its functionality could enable Bitcoin to skyrocket fivefold in just a few years, Chen said.
It's based on Total Value Locked, or the amount of assets staked in the Bitcoin protocol. Currently, this metric is roughly in line with Ethereum's levels just before its meteoric boom in 2020-2021.
For Ethereum, new DeFi features and new coin launches sparked a dramatic rally, with Ether rising 3,702% from peak to trough. For Bitcoin, the surge in BRC-20 adoption could be the foundation for a surge of its own, albeit less amplified.
“Despite Bitcoin's high market cap, it may not see as much exponential growth as ETH in 2020 given its low base effect and stringent regulatory conditions. However, even a weaker 2x surge could still result in a 5x increase in value of the leading cryptocurrency,” Chen wrote in the note.
Since its launch in March, BRC-20 has seen nearly 67 million registrations.
Their explosive popularity has meant that crypto miners, who are paid a set fee for minting these assets, are increasingly making profits. Transaction fees have rarely been the primary source of income, but the surge in activity is changing the industry's thinking, said Brian Wright, co-head of mining at Galaxy.
“These events probably won't be sustained, but there will be periods throughout the year where miners will be able to make more money than expected as a result of transaction fees,” he said on the Galaxy Brain Podcast in April.
