You may have heard the term “Bitcoin Maximalism” on crypto podcasts or read about it on blogs. This term refers to a community of crypto enthusiasts with special views who strictly adhere to certain ideological and technological principles. In short, every Bitcoin maximalist is unwaveringly convinced that Bitcoin is the only “correct” cryptocurrency. They are also sure that altcoins (any cryptocurrency other than Bitcoins) are not only technically imperfect, but in general are rather dubious products of the crypto industry. Some ardent Bitcoin maximalists sweepingly speak of altcoins as “garbage”.
Considering that today there are a huge number of altcoins, we can safely talk about the oversaturation of the market. However, not everyone sees this as a problem. Many crypto enthusiasts take the position that diversity is a defense against monopoly, as well as an opportunity for users to choose a crypto product based on their needs and financial capabilities. Let's try to understand this issue in more detail and find out what experts think about this.
The problem of oversaturation of the cryptocurrency market
History shows that pioneers in new technologies are not always long-lived. In the early days of the Internet, America Online (AOL) was just about the only tool people could use to access the Internet in its early years. It seemed like AOL would be around forever. Alas, AOL was gradually supplanted by other tools and technologies, and today the company does not even exist. Could Bitcoin wind up in the same situation?
Satoshi Nakamoto unveiled the idea of a digital currency and showed the world what a cryptocurrency could be. But the use of this technology is now much wider and larger than anything Satoshi could ever imagine. Cryptocurrencies can be used in the economy, business, IT technologies and other areas of society. However, Bitcoin is not suitable for all these tasks, and there are now many other products that surpass it in terms of technological advances.
Bitcoin has unsolvable issues, such as micropayments and scalability. Satoshi's vision also called for a fully decentralized blockchain architecture. He did not think that in many cases centralized blockchains could be more convenient. For these reasons, perhaps, although Bitcoin is still a good store of value (similar to gold), this does not make it the best product in the crypto industry. Nowadays, there are other, more innovative products.
Derek Lim, Head of Crypto Insights Department at Bybit, raised questions about the size of the existing crypto market and assessed the growth rate of the industry. He noted that 2021 was a turning point for the adoption of cryptocurrencies. Someone may even still be shocked by the growth rate of the tokenized economy. However, if we zoom out to look at the crypto industry in the context of macroeconomics, we see that the crypto market capitalization is estimated at a solid $2 trillion, but this is only a small part of the global economy. In 2015, the World Economic Forum estimated that by 2027, 10% of global GDP will be stored on blockchains. The process is moving fast, but the projected goal is still far away.
According to the expert, the growth challenges of emerging sectors may be more prominent in the digital asset industry because of the open and decentralized nature of the ecosystem. Market participants and investors must remember that cryptocurrencies are associated with risks, and each participant must determine for himself the acceptable level of risk. Already, there are many tools, platforms and services for risk assessment and mitigation. But only more transparent operation will benefit the industry in the long run. A larger and more inclusive market serves this purpose.
However, everything has a downside. The number of altcoins registered on CoinMarketCap is approaching 20,000, but even the most ardent crypto enthusiasts will name only 20–30 coins. Almost no one knows anything about other projects, especially if they are not at least in the TOP 100. Nevertheless, these coins and tokens exist and many of them have more valuable qualities and characteristics than their more popular competitors. Such a variety can confuse beginners because it is very difficult to choose one project out of 20,000. This is a clear sign that the problem of oversaturation of the crypto market exists. We asked the experts if this was really the case and if such diversity could somehow harm the crypto industry.
Analyst Aziz Kenzhaev says,
“It can have negative effects. I believe that they mean meme-coins or the so-called ‘shitcoins’, which carry no value behind them. In some ways, I agree that there are such coins and their abundance will not benefit the crypto industry. Since the market is still young and ‘young investors’ occupy an increasing part of it, it will be sad if one of them invests in one of these coins, does not receive the desired profit and simply loses faith in the crypto industry. This is the most painful thing for our industry and we must now fight not only to attract newcomers but also to keep them.”
Vladimir Gorgadze, head of the Blockchain master's program at MIPT, takes an ambivalent position. He believes that the market is really oversaturated with tokens, many of which are dead or practically dead. Their catalog can be found at deadcoin.info. The abundance of such tokens leads to the dissipation of resources, including human resources, and the "overflow" of blockchains with unnecessary information, since the blockchain is primarily a database. Overflow, in turn, complicates the work of miners (validators) and takes useful capacities because full blockchain nodes store and access the entire history of transactions. In addition, there is a dispersion of audience attention and sometimes a loss of trust from crypto investors who have invested in unsuccessful projects.
Yaroslav Safonov, Director for the Development of Distribution Channels for EMCD, the largest mining pool in Eastern Europe, admits that the problem of “oversaturation” of the market exists and it would be more correct to call it a “bubble”. He also notes,
“2021 has become a landmark and record year for the cryptocurrency industry. There were a lot of important events: historical highs of $69 thousand for Bitcoin and $4.8 thousand for Ethereum, the emergence of the first public crypto exchange, Coinbase (whose shares are traded on the stock exchange), the capitalization growth to $3 trillion (an increase of almost 300% over year) and that's not all. Of course, all this has attracted institutional capital and a large number of retail investors to the industry.
“2021 has seen a huge cash flow into digital assets and related companies. Because of this, prices grew. At the beginning of 2022, the economic situation changed, and the flow of new funds into cryptocurrency slowed down, but it is still ongoing. It makes no sense to make forecasts in the current situation, since events may develop differently in the future. If the world plunges into a deep economic crisis, then, of course, this will also affect cryptocurrencies. In the event that people begin to use cryptocurrency more actively to protect capital and circumvent restrictions, this can maintain the current positions of digital assets and even give impetus to further growth.”
Victoria Ustimenko, CEO of the PR agency PRETOBUSINESS, notes that the crypto industry is a volatile and still high-risk market, and there is no saying about a relatively stable situation there. Some analysts and owners of the largest crypto exchanges think that the market is overheated. However, according to the expert, this is more likely the moment of the next round of evolution than a frightening trend.
Dmitry Chernov, CEO at Armacoin Ltd, is sure that the main problem is not the oversaturation of the crypto market, but the complete identity of many projects, as well as another intervention in this area by various scammers. The expert adds,
“For example, scammers very often turn to me as an engineer of decentralized networks so that I can create for them some kind of fraudulent token with transfer restrictions (except for the white list) or a fraudulent smart contract with which you can allegedly sell tokens for an airdrop, but in fact, crypto assets are simply withdrawn there and that’s it. Of course, I refuse such hackers, as I have a negative attitude towards all types of fraud.”
Dmitry Noskov, an expert at the StormGain crypto exchange, agrees that in general there are really a lot of different cryptocurrencies today, and their number has already exceeded 500 thousand. Moreover, many projects do not represent anything at all, and about 60% of them are already “dead”, since they have not aroused any interest among investors. According to the expert, they "litter" the market, spoil its reputation and confuse investors.
Anton Bykov, Senior Analyst at Esperio, says,
“There have always been a huge number of ‘empty’ projects on the market, which were created only for the purpose of earning money by selling tokens. Some of them fall off immediately, some last quite a long time, and their creators can even earn again during the next rally. In general, you can discuss this issue for a long time and introduce criteria for evaluating the futility of the project. For example, Internet Computer and Cardano have a huge capitalization, but their infrastructure is extremely poorly developed, differently not even from Ethereum, but from Avalanche, Solana and other young blockchain networks, which means that the former can also be written off.
“The cryptocurrency market is an opportunity for everyone to become a venture investor and to invest in a project at a very early stage of development, when it is nothing and, perhaps, will not be anything for a long time. There are no quarterly reports, fundamental indicators and other things, so there is nothing surprising in the fact that market capitalization changes depending on the degree of interest in it. If successful, altcoins can grow at a much higher rate than BTC. For example, in 2021, the cost of Bitcoin increased by 75%, and, let’s say, Harmony by 6000%. New and promising protocols are growing faster than the old ones, which have already brought their "X" profitability by the current moment.”
Gleb Jount, the official representative of the Bitget exchange in the CIS, emphasizes that over the past three to four years, the number of different coins on the cryptocurrency market has grown by almost 10 times. The industry has not been standing still and has been gaining more and more popularity and there has been an influx of new users. In this connection, there was a natural expansion of competition in the offer of cryptocurrency services, protocols and infrastructure solutions. The expert also adds that the decentralized nature of the market allows almost anyone to create a token on a particular blockchain. This freedom to participate in the market can lead to market oversaturation. But in the long run, coins with practical uses will carry value.
Why a large number of coins and tokens is not always a problem
Not all experts are intimidated by such a variety of altcoins. Many believe that even with the current number of projects, it is too early to talk about oversaturation, if we compare these figures, for example, with the number of company shares in the traditional stock market. Others adhere to the position that the market still has room to grow and soon we will see really worthy projects with practical value for society.
Marat Mynbaev, investor, expert in fundamental and technical analysis, Founder of Amir Wallet, comments,
“I believe that the cryptocurrency market is still undervalued and is in its early stages of development. Novice investors study the market through various projects, which, as a rule, do not live long in the market in 80% of cases. This is a natural development process. Of the 500 opening projects, only 100–150 will be able to become full-fledged market participants. And this is good, and the market should continue to grow and develop.”
Igor Zakharov, Manager of the DBX Digital Ecosystem, notes that some experts argue that the cryptocurrency market has recently included an excessive number of tokens, which is causing an oversaturation of offers unprofitable in the long term. However, whether everything is so simple is a big question, since most of these specialists pay attention only to Bitcoin, preferring to work with only one type of crypto assets.
The diversity of altcoins is a positive phenomenon for the market, as new solutions to the current problems of popular cryptocurrencies are constantly emerging, allowing the industry to develop at a rapid pace. In addition, the absence of competition would lead to the monopolization of the market, the centralization of assets already in the crypto space, which directly contradicts the ideals of the crypto industry. That is why a large number of new platforms and blockchains are emerging which are trying to find flaws in others, correcting them on their own resources, after which the cycle continues with them.
The expert adds,
“Altcoins based on Bitcoin work in the same way. The first cryptocurrency is not perfect in everything. In addition, it experiences oversaturation of users in its blockchain, while the same Litecoin corrected the main flaws of Bitcoin during development, improving its potential with much greater accessibility. At the moment, the oversaturation of the market is more of an advantage plus than a drawback. The situation when an oversaturated crypto market becomes a problem for its development will most likely not come soon. Altcoins based on Bitcoin work in the same way. The first cryptocurrency is not perfect in everything and also experiences oversaturation of users in its blockchain, while Litecoin corrected the main flaws of Bitcoin during development, improving its potential with much greater accessibility.”
Independent financial expert Alexander Ryabinin answers the question as follows:
“If we talk about oversaturation, then it definitely exists. The question is what form it acquires. It is a bunch of fraudulent ‘projects’ into which newcomers are driven with the help of aggressive advertising about fabulous profits. Otherwise, I believe that the cryptocurrency market has a lot of room for expansion and growth. For example, in the US alone, there are tens of thousands of companies offering their shares. Is the market oversaturated? And now we are talking about an international infrastructure.”
Denis Smirnov, EMCD Liquidity Manager, blockchain specialist, researcher of cryptocurrencies, sees no problem in a wide variety of altcoins. According to the expert, the industry is much more harmed by the large number of “junk” tokens created for fun or purposefully to deceive users with a low level of financial literacy, which, by the way, is the real problem. But the growth in the number of cryptocurrency products that have practical value, on the contrary, is a driver for the development of the industry.
Danatar Atajanov, Brand-manager OXLY.IO, notes that self-regulation is at the heart of a free market. He says,
“The crypto market is the freest financial market, if not anarchic, at least for now. The explosive growth of interest in blockchain technologies is explained not only by the interest in cryptocurrencies but also by the new opportunities that the technology itself brings. The blockchain is not centrally controlled and allows anyone who has mastered the technology to create their own coin. Another question is whether this coin carries any value. Some creators are trying to improve existing projects, others are interested in market speculation on meme coins, and yet others are trying to invent something completely new. In many ways, this is evolution. It cannot be stopped. I don’t think it can harm the crypto market. This is its essence.”
Alexey Stepanov, website developer, entrepreneur, expert on NFT collections, is sure that while new tokens are being created and people continue to buy them, we can say that the market is looking for a balance. Of course, 99% of the existing tokens are of little use and often are useless and simply fraudulent solutions. But this is a market, and as long as there is demand, new coins will be created, given that now there are a lot of tools so that with basic knowledge from YouTube, schoolchildren can issue their own cryptocurrencies.
Egor Abramov, principal of the Fort Ross Ventures venture fund, notes that, according to the Coinmarketcap.com website, there are now 18,774 different crypto coins in the world. He says,
“Is it a lot or a little? It depends on what you compare it with. About 6,000 companies are registered and traded on the American stock exchanges NYSE and NASDAQ. On the other hand, not all businesses are traded on stock exchanges. For example, only in the United States there are about 30 million private enterprises. In the case of cryptocurrencies, the parallel is rather closer to private enterprises, because in the blockchain, each project must have its own token. Therefore, I would not say that there are too many of them.”
Vladimir Gorgadze also highlights the positive aspects of a wide variety of altcoins on the market, saying,
“Many blockchain developers are working on optimizations, including cutting off the so-called ‘dead tails’ that I talked about earlier, which leads to technological improvements and new interesting solutions. In addition, many projects that have sunk into oblivion carried some interesting innovative ideas that could not ‘take off’ due to various mistakes, for example, managerial, technological or marketing. A failed implementation is often a very rewarding experience because we learn from mistakes. Thus, this aspect, on the contrary, helps the crypto industry to develop.”
Vladislav Akeliev, Development Director of the ECOS cryptocurrency investment platform, also does not see any problem in the large number of cryptocurrencies. According to the expert, the market is a market because it self-regulates. Unnecessary, unclaimed cryptocurrencies will disappear from the market if they do not find their investor. And if a project has found its followers, then why should the market interfere with them? Cryptocurrencies are about decentralization and freedom, not centralization and restrictions.
Anton Bekhmetiev, Managing Partner of Legal Aid, says,
“We work with cryptocurrencies all the time in our main activity, so we have to deal with all sorts of incidents, when someone wants to pay for our services with the devil knows what, with some strange coins that are about to make five X, also with a stake in an IT company that will soon beat Apple, so life and work have taught me to understand cryptocurrencies.
“The currency market is oversaturated, of course, but it is a market! As in any fashionable and fertile place, new shoots appear abundantly on it. It all reminds me of natural selection: many organisms try to survive, but the fittest survive, and the same with business. You can, of course, artificially support something, but no matter how hard you try, the end will be the same. A sad end. In this regard, is the cryptocurrency market oversaturated with coins? Definitely yes. Is this a problem? I think no. This, on the contrary, contributes to the popularization of cryptocurrencies and the natural survival of the most worthy representatives of their kind.”
He also notes that the creation of new coins is like a creative business process. The more there are, the better. In the future, perhaps society will make the crypto market replace the conservative Bretton Woods financial system in which the world now lives, literally in everything. The expert adds,
“The super gold standard will be, for example, Bitcoin, since it is finite and will be all mined up. We do not yet know an example of such a resource on Earth (which will definitely end in the coming years). It will eventually be bought by the richest and most powerful people. Some Bitcoin forks will become an alternative to gold and the petrodollar. There will be various industry-specific coins (altcoins), the most convenient for circulation in some special environment. And, of course, in the computer science lesson in grade 5, each student will create their own coin. Is it bad? I don't know, I don't think so. Now there are so many problems in the world with finding an alternative to the dollar that the transition of the world to cryptocurrencies would be a natural transition of humanity to a new post-information meta-era, with new means of production and payment and a new architecture of the world.”
The Bitcoin Maximalism Movement
One thing that sets Bitcoin Maximalists apart from the rest is that they go beyond the technical advantages of blockchain and see Bitcoin as a currency and technology that has a profound impact on the monetary system, economy, censorship, and governance. In other words, regardless of the price of Bitcoin, it is the very architecture of the cryptocurrency that makes it so revolutionary.
Bitcoin may be the most popular decentralized cryptocurrency and have the highest market capitalization, but it is certainly not the most performing crypto product. This cryptocurrency still has serious problems with scalability and energy efficiency. Despite these current shortcomings, maximalists are confident that Bitcoin will inevitably become the most valuable, reliable and ubiquitous form of money in the future. Just as gold shaped the modern financial system, Bitcoin will be the “digital gold” of the future.
We asked experts how they generally felt about the Bitcoin Maximalism movement and whether the first digital currency was really the epitome of perfection in the world of digital assets.
Vladimir Gorgadze believes that Bitcoin can hardly be called the epitome of perfection in the world of digital assets. Yes, it was the first, but it has a number of shortcomings, of which it should of note are:
- The language and protocol of the first cryptocurrency does not allow solving NP-complete problems or creating complex smart contracts. It is impossible to implement all the variety of properties of tokens mentioned above (the topic is very extensive). Simply put, Bitcoin is not applicable for business projects.
- The speed of the protocol is very slow, a block every 10 minutes. This prevents Bitcoin from becoming a means of payment.
- The blockchain throughput is low.
- The monetary and fiscal policies embedded in the Bitcoin protocol are primitive. For example, it does not include cost regulation mechanisms.
The expert, however, notes that Bitcoin is rightfully called “digital gold”. This is a kind of symbol of the crypto industry, which embodies the most useful and striking features:
- The blockchain is decentralized to a very large extent.
- The blockchain does not have a “leader”, i.e. no risk of protocol manipulation.
- Bitcoin received universal acceptance (mass adoption).
- Bitcoin really solved the problem of avoiding double spending and became a pioneer in this.
- The name of the first coin proved very successful.
- And, finally, a whole class of interesting and diverse assets has grown on the basis of Bitcoin.
Aziz Kenzhaev believes that in terms of decentralization, Bitcoin can be considered a perfect asset. He says,
“We all remember that Satoshi has more than 1 million Bitcoins, and he will hardly want to sell everything at once and do something with such a big amount of money. Since the release of Bitcoin, there have been no centralized actions with it, but the current altcoins are tied to funds and private companies that can set the rules for their circulation. Only in this aspect is Bitcoin the epitome of perfection.”
Alexey Stepanov thus answers the question about the advantages of bitcoin over other crypto assets,
“Several top ecosystem blockchains will remain on the market, niche blockchains with specific functionality will also live, and Bitcoin will serve as a repository of liquidity, an accumulation tool.”
Yaroslav Safonov agrees that Bitcoin has many advantages over traditional asset classes and can be widely used in the modern world. At the same time, the expert notes that neither Bitcoin nor any other cryptocurrency will replace fiat money. Another problem facing Bitcoin so far is the high commissions in the network, which do not allow small transactions. For example, when paying for a cup of coffee for $10, the commission can be half the amount of the transaction. And at times of high load on the network, it can be even greater. Effectively, the buyer overpays twice just because he uses Bitcoin. Of course, you can use the Lightning Network, but this is already an add-on to the blockchain and a completely different situation.
Derek Lim shares his considerations,
“Crypto economics has come a long way since the birth of BTC. We have witnessed dramatic changes in how the global economy works and how we adapt in work, life and personal finance.
“In a post-pandemic world where distant work is the norm and a metaverse of economic value is taking shape before our eyes, there is no longer a perfect single token that fits all. Smart contracts serve different purposes. From value exchange to L2 utilities, from governance to digital proof of ownership, tokens are created and used by innovative and creative communities. While BTC has established itself as the symbolic currency of the future, we are seeing more and more affordable and scalable solutions that meet the various needs of the crypto community.”
Denis Smirnov agrees that Bitcoin is undoubtedly one of the most important achievements of the modern world, but it is completely incorrect to consider it (and anything at all) the embodiment of perfection. Progress does not stand still, and the first cryptocurrency itself is a great example of how important constant development is. Today, we can assume that Bitcoin has failed as the “digital peer-to-peer cash system” that it was originally designed to be. But it has accomplished a much more important task, showing how blockchain and cryptocurrencies can make the most diverse areas of our lives much more accessible, transparent and efficient and giving life to an entire galaxy of new technologies that also continue to develop. And Bitcoin, as a result, took pride of place as “digital gold”, an investment asset in the digital age. Is gold a perfect metal? Maybe. But is it the most useful?
Victoria Ustimenko says,
“I am not a Bitcoin maximalist. I do not consider Bitcoin a panacea. For a conservative holder, it is easier and more reliable to hold money in stablecoins than in Bitcoin. Bitcoin and altcoins are for investors. As for perfection, if Bitcoin was perfect, altcoins would not exist.”
Danatar Atajanov believes that the emergence of new, more advanced algorithms and protocols leads to the migration of capital to new industries, for example, the emergence of DeF, NFT and metaverse markets. For several years, they have grown many times over and continue to show a positive trend. Demand for coins that do not meet the new requirements will decrease and they may be replaced by new digital assets. But it is still too early to write off the “grandfather”. Bitcoin has ceased to be just a tool for speculation and has become a strategic asset for institutional investors. It will remain the standard and measure for decades to come.
Dmitry Chernov says,
“The Bitcoin blockchain is no longer so perfect. But each of us is well aware that, over time, its price will only grow. I am well aware that only 3% of people in the world own cryptocurrencies and every year their number will increase, which means there will be a greater deficit for the main cryptocurrency. Maybe in the future some other cryptocurrency will become the main one (for example, the US dollar became a reserve currency only in the 20th century, before that there had been the pound sterling, the French franc, etc.), everything flows, everything changes.”
Vladislav Akeliev agrees that Bitcoin is the main cryptocurrency. This is an indisputable fact, because it has the largest capitalization and the level of integration into people's lives. But it is difficult to call it ideal, since over time the community discovered the inconveniences of Bitcoin and, moreover, other cryptocurrencies were able to solve these inconveniences. But also bitcoin is the first cryptocurrency. To get the perfect result at once is almost impossible, so there is nothing wrong with the problems.
Egor Abramov says about the fact that Bitcoin is considered the perfect digital asset,
“No, I do not agree with this statement. There are several dozen blockchains in the crypto world today, and many of them do not compete, but rather complement each other, because different applications require different approaches. Somewhere security is more important, somewhere decentralization, and somewhere cheapness and speed of transactions.
“The Bitcoin blockchain is good for its principles, i.e. immutability of approaches, simplicity and accessibility. Bitcoin perfectly performs the functions of gold and a payment instrument. But this is not enough to solve many other challenges facing the crypto community. “
Alexander Ryabinin agrees with the opinion of the previous expert, saying,
“I do not accept the ideology of Bitcoin maximalists at all. Yes, this project gave a breakthrough for the development of the industry. But I don't see any further value other than a collector's item.”
Dmitry Noskov agrees that Bitcoin has its drawbacks because nothing is perfect. These are both scalability and security issues. But, nevertheless, nothing better has yet been invented, and other projects in terms of their quality characteristics cannot yet reach Bitcoin.
Anton Bykov believes that now the value of Bitcoin is only in that it is an example of how it is possible, if you like, to create a cryptocurrency as close as possible to decentralization. This is exactly the image for which one should strive, while it is unlikely that anyone will dispute the fact that the Bitcoin technology has long been outdated.
Gleb Jount comments,
“I respect Bitcoin maximalists. In my opinion, the first digital currency embodies the necessary characteristics of decentralization, anti-inflationary asset and technical security that make it the most suitable at the moment as the main and most reliable sovereign currency in the world of digital assets and the ever-expanding crypto economy.”
Bitcoin has certainly established itself as “digital gold”. In 2021, there was more institutional investment in cryptocurrencies than ever before, and most of it was in Bitcoin. Bitcoin Maximalism presents a compelling case for why Bitcoin could be the main cryptocurrency of the future, but whether it will be the only cryptocurrency is an ongoing debate.
