Can Bitcoin Compete on Tech?

Bitcoiner Dilemma. Many crypto assets surged early last week after it became evident that Ethereum would receive spot ETF approval and its long-awaited regulatory clarity as a non-security, but this development sucked the wind out of the Bitcoin ecosystem’s sails. What's going on?

Although BTC eked out dollar gains amid a then-rumored increase in ETH ETF approval odds, last week marked the worst performance in BTC Dominance since the arrival of spot BTC ETFs led to massive redemptions for the Grayscale Bitcoin Trust (GBTC) in January.

If conducted today, Ethereum’s initial coin offering (ICO) would constitute an illegal security offering; precedent established by ETH’s ETF approval in light of this fact underscores that any crypto asset – regardless of its origin story – can become a non-security and deals a major blow to doctrines that held BTC was uniquely positioned for regulatory capture.

The loss of this defining feature is not only weighing down BTC, but has heavily impacted the performance of numerous associated ecosystem tokens.

While Bitcoin remains the oldest blockchain in existence, its non-security status is no longer a meaningful differentiator when considering alternative crypto investments and forces the ecosystem to compete more so on its technological merits.

Unfortunately, Bitcoin’s historical resistance to technological change in pursuit of ultra-hard money above all else has resulted in a degraded user experience and forced developers to adopt workarounds to deploy applications, leading the network to score low in this category…

Assets created using Bitcoin-native standards like Ordinals, BRC-20s, and Runes had previously received immense interest among investors seeking enhanced BTC upside, but are painful to interact with and have no value beyond speculation.

Developers have attempted to imbue the Bitcoin network with enhanced utility via layer 2s, however, existing solutions are merely sidechains that do not inherit any security from base-layer consensus.

Recognizing that BTC is not uniquely positioned to be the only asset with regulatory clarity and access to TradFi, market participants are seemingly rotating out of BTC-linked tokens, evidenced by the immense weakness experienced by many of these tokens in comparison to their Ethereum-native counterparts.

Despite the outsized upside these tokens have at times experienced, loss of the regulatory capture narrative should lead these investments to trade in line with respect to their fundamentals at comparable valuations to applications on other chains.