Tuesday, December 5, 2023

Is Bitcoin Undervalued? – Bitfinex weblog

Is Bitcoin Undervalued?

It’s turn out to be a convention all through the cyclical Bitcoin growth and bust market cycle, that whereas Bitcoin is bearish, the builders will merely proceed to construct. It’s this ethos which has sustained Bitcoin’s first mover benefit, all through the primary 3 Bitcoin halvings, seeing it emerge because the undisputed market chief with every bull run.

What Have the Builders Been Constructing This Bear Market?

This bear market, just like the others previous it, has been very busy with Bitcoiners launching new tasks of all types, in many alternative areas of the general ecosystem. Many progressive new approaches to unravel a few of Bitcoin’s most persistent limitations have led to many thrilling new developments, on quite a lot of fronts.

There was vital headway made in Layer Two tasks, targeted on scaling and privateness enhancements. We’ve seen two rising Chaumian E-cash implementations, tokenisation schemes over Lightning and off-chain, and others that additionally work with on-chain BTC. We’ve additionally witnessed new improvements like Pear Credit score and Slash Tags, which have  provided customers blockchain-like experiences with out the bloat of pointless tokens or blockchains.

Aside from Layer Two tasks, we now have additionally seen the phenomenon of an rising and thriving decentralised and censorship resistant social media ecosystem full with built-in Lightning Community powered micropayments. It began with tasks like Adam Curry & Dave Jones’ Podcasting 2.0 motion, and continued with efforts like Stacker.Information, Starbackr, and final however undoubtedly not least, the Nostr protocol.

With the systemic collapse of a few of crypto’s most iconic startups, exchanges, funds, and lenders in the course of the crypto winter, we noticed the larger crypto neighborhood reply by transferring in direction of self-custody and self sovereignty. They rushed to tug cash off exchanges and to safe them themselves.

The consequence has been a number of new, straightforward, all-in-one Bitcoin & Lightning node merchandise, open supply software program stacks, and a thriving {hardware} pockets market, as Bitcoiners and their crypto counterparts sought safe methods to retailer their cash. A side-effect of this self custody motion has been upwards worth strain as much less BTC is out there on the spot market, on exchanges.

Lastly, we now have seen the mining trade undergo the height and trough of bear market worth volatility and emerge but extra resilient on the opposite finish. Some much less worthwhile miners have been pressured to capitulate, but different newer miners entered the market to contribute hash energy of their place. 

It additionally appears that the vitality inflation skilled following the outbreak of the battle in Ukraine, has began to subside as effectively. In the meantime, optimistic information has been regular, as mining with primarily renewable and waste vitality sources has elevated. Ordinals have been additionally an surprising boon to Bitcoin’s charge market, and miner profitability.

Miners are lastly beginning to breathe a sigh of reduction and put together for the upcoming halving subsequent 12 months. All of those developments in Bitcoin infrastructure, Layer Two tasks, Lightning Adoption and censorship resistant social media with built-in Lightning, are exceptional. It appears the tempo of Bitcoin adoption hasn’t proven any indicators of slowing in the course of the crypto winter. 

This leads us to ask, is Bitcoin undervalued? Contemplating that the market has begun to point a reversal could also be shut at hand, and so many advances have been made on the tech entrance, we predict, fairly presumably, sure. 

Layer 2 Tasks to Preserve an Eye on

A number of the Bitcoin tasks with essentially the most enthusiasm are Layer Two tasks which handle points, like on-chain congestion, charges, scalability, and privateness. Let’s check out some which have had essentially the most enthusiasm from the neighborhood.

Lightning Community

Lightning Community is Bitcoin’s most well-known Layer Two, a close to immediate cost community designed to scale Bitcoin, and make small purchases quick and unfairly low cost. Lightning has seen continued adoption, as liquidity, nodes, and use have all elevated all through the crypto winter. Tasks like Podcasting 2.0, Nostr, and Stacker.Information have made Lightning micropayments central to the consumer expertise.


RGB focuses on issuing property and tokens on Bitcoin, both on Lightning Community or on-chain. RGB permits customers to create and problem their very own tokens, altcoins, stablecoins, Non-Fungible Tokens (NFTs) and different blockchain property. It has been within the works for some time, however it’s lastly attending to the stage the place we could start to see wallets combine tokens by way of RGB within the very close to future.


Taro is a Taproot-powered Layer Two tokenisation challenge targeted on bringing stablecoins and different property to Lightning Community. Taro’s property will be capable of be deposited immediately into Lightning channels and appropriate with the broader Lightning Community ecosystem. Taro permits property to be created and issued in a extra personal and scalable approach.

Synonym & Slash Tags

Synonym has got down to show its Bitcoin-only thesis by constructing a variety of Bitcoin and Lightning Community options that provide a blockchain-like or Web3-like consumer expertise with out utilizing extra blockchain know-how except for Bitcoin. It has pioneered “Slash Tags”, a protocol which lets customers handle their identification by means of cryptographic keys, to create their very own curated content material feed from different customers, Bitcoin companies, wallets, exchanges, and information websites, which may be managed immediately from inside Synonym’s flagship Bitkit pockets.


Cashu is one implementation of a Bitcoin Lightning Community powered Chaumian E-cash and Mint protocol. Cashu lets customers reap the benefits of Lightning Community’s close to immediate transaction settlement and Chaumian E-Money’s close to good privateness to supply a brand new personal and scalable option to make Bitcoin-backed, immediate, low-fee, and untraceable funds. Cashu can simply be carried out in any app or web site, and customers can create their very own mint and problem their very own E-Money in only a few clicks. 


Fedi is the second implementation of a Bitcoin Lightning Community powered Chaumian E-cash and Mint protocol. Fedi makes use of Fedimint, a Chaumian E-Money implementation which leverages a federation of mints, fairly than particular person mints, as in Cashu. Fedimint’s federated Chaumian E-Money mints add the standard of decentralisation to the belief assumptions round utilizing Chaumian E-Money, which make it tougher for the mints to behave maliciously. Fedimint affords the same immediate, personal and untraceable, low-fee funds system as Cashu.

Liquid Sidechain

Blockstream’s Bitcoin sidechain, Liquid, has additionally seen some main headway, because it has been the first alternative for asset issuance for Bitfinex Securities, our Tokenised Safety buying and selling platform. The primary Tokenised issuance was Blockstream’s Mining Observe, with others coming quickly. Bitfinex Securities was just lately granted a Digital Belongings Licence in El Salvador below its new Digital Belongings regulation, which paves the best way ahead for extra tokenised safety choices which will likely be leveraging the Liquid sidechain for asset issuance.

RSK Sidechain

RSK, previously generally known as Rootstock is one other Bitcoin sidechain that has seen a flurry of exercise all through the bear market. RSK brings EVM compatibility, Sensible Contracts, tokens, NFTs, Decentralised Functions (DApps), and Decentralised Finance (DeFi) to Bitcoin. RSK was created by a staff of Latin American Bitcoiners primarily based in Argentina, and as such, has seen a excessive diploma of adoption from Latin America. Tasks like Tropykus Finance and Cash on Chain, have been constructed by groups in Latin America, to fulfill the particular wants of customers in Latin America, utilizing RSK.


Stacks is a Bitcoin Layer Two challenge that was created to deliver extra performance to Bitcoin. Stacks, like RSK, envisions bringing DeFi, DApps, NFTs, tokens, and Sensible Contracts to the world of Bitcoin. Stacks has skilled a resurgence of curiosity within the aftermath of the discharge of Ordinals, a protocol for “Inscribing” NFTs on single Satoshis, which have been built-in into the Stacks ecosystem, which has all the time been targeted on NFTs. 

Decentralised, Censorship-Resistant, Social Media with Lightning Micropayments

The Bitcoin empowered social media revolution is in full swing with Podcasting 2.0, the Worth 4 Worth mannequin and Nostr, which powers quite a lot of different video, micro-blogging, running a blog, and streaming websites that enable content material creators to obtain streaming Satoshis and micropayments immediately from their followers and followers.

Podcasting 2.0

Podcasting 2.0 is an open supply challenge which permits creators to monetize their podcasts by way of Streaming Satoshis, Boosts, Worth splits, and permits podcasting to stay open and decentralised whereas encouraging censorship-resistance. There are over 50 Podcasting 2.0 apps that incorporate its new options and Lightning Community micropayments for Worth 4 Worth monetization.


Nostr isn’t a social media platform, however it’s a decentralised social media protocol which is open, decentralised, and censorship-resistant. The most well-liked Nostr purchasers provide a Twitter-like expertise, though Nostr is flexible and can be utilized for quite a lot of completely different social media experiences, like Nvote.co (a Nostr-based Reddit clone), Habla Information (a Nostr-based Medium/Substack clone), and even Chess. Nostr, like Podcasting 2.0, has carried out Lightning Community micropayments which permit customers to ship “Zaps”, tiny Bitcoin funds as ideas for posts they get pleasure from.


Stacker Information is like Hacker Information, an open board the place anybody can submit, besides Stacker Information has Lightning Community micropayments built-in. Customers can earn Satoshis from different customers, upvotes, common threads and extra. Stacker is among the hottest Lightning enabled social media websites, so there’s a variety of good content material, they usually have an ideal Bitcoin jobs board.


Wavlake is a Podcasting 2.0 powered audio streaming website, that goals to let musicians monetise their music utilizing Podcasting 2.0’s assortment of Lightning Community Worth 4 Worth instruments. This implies you possibly can stream Satoshis and increase songs out of your favorite bands and the artists themselves obtain the cash, bypassing the report label. It’s a win-win, and likewise censorship-resistant.


Starbackr is a Patreon-like platform which lets customers monetise their content material utilizing Bitcoin Lightning Community funds, utilising the Worth 4 Worth mannequin. Starbackr customers can submit content material like photos and movies and even do a dwell stream, which viewers can tip and ship Satoshis over Lightning for.


Lightning Video is a Youtube-style video streaming website that lets content material creators monetise their video content material by a Lightning Community paywall and micropayments acquired from viewers. It, like the opposite Bitcoin powered social media websites, goals to supply a censorship-resistant platform to submit and monetise content material by leveraging the facility of Bitcoin and Lightning micropayments.

Bitcoin Mining Seems to be Making a Comeback

Bitcoin Mining’s hash charge has seemingly stabilised and begun to get better, after reaching all-time lows. Hash charge progress has surpassed Luxor mining’s estimates for progress of their first quarter of 2023 report, and appears to be on a path to take care of this progress. As Bitcoin has rebounded in worth, a variety of new {hardware} has come on-line over the primary quarter, within the type of Software Particular Built-in Circuit (ASIC) miners.

Hash worth has risen 31 % within the first quarter of this 12 months, which means that many miners that have been unprofitable, beforehand within the bear market, at the moment are within the inexperienced once more. Although hash worth has seen a considerable improve, it’s nonetheless down 58 % 12 months over 12 months (YoY). Nonetheless, going into the subsequent halving in 2024 may dramatically change this metric over the course of the subsequent 12 months.

Vitality costs additionally appear to lastly be making headway in retracing the explosive progress in costs related to the outbreak of the battle in Ukraine, and miners are having fun with this lower in operational overhead. 

The surprising improve in transaction charges because of Ordinal Inscriptions has additionally been a nice shock to these within the trade. To date, miners have reportedly mined 150.32 BTC of Inscriptions transactions price $3,731,429 within the first quarter of 2023.

The marketplace for ASIC Miners has additionally reportedly reached a backside and could also be set for a little bit of a rebound after plummeting for many of 2022 in the course of the crypto winter. Bitmain can also be set to launch a brand new line of “next-gen” ASICs.

This perceived rebound within the mining trade, which may probably simply be getting underway, is a sign that the bear market could lastly be coming to a detailed heading into the subsequent halving, anticipated to happen roughly someday in early April of subsequent 12 months.

If we’re headed into a brand new Bitcoin-fueled crypto bull run, Bitcoin at its present worth could look like a legendary entry within the coming months with hindsight. Bitcoin will definitely appear undervalued if it approaches new all time highs. It looks like the builders within the Bitcoin ecosystem have been busy sufficient all through the bear market to supply the substance to again a brand new wave of adoption and new customers. General sentiment appears to be enhancing.

What do you assume? Is Bitcoin undervalued?

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