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Anyone who has been paying attention to bitcoin for a full market cycle is familiar with the Bitcoin Obituaries site that tracks the 450+ times that the death of the project has been declared prematurely. Why do pundits and journalists continue to repeat this simple mistake for over a decade?

Unfortunately, few folks track bitcoin's health any deeper than its exchange rate. Thus they incorrectly assume that when the rate decreases, the ecosystem is dying... and we end up with tongue-in-cheek gems like this:

Those of us for have seen a few cycles know better.

Defining death

I posit that as long as bitcoin's "heart" is still beating and blocks are circulating, the network is "alive" — AKA it is operational.

If you read the whitepaper, you may note that none of the system's operations have any inputs or understanding of fiat exchange rates. Of course the exchange rate can affect miners and businesses on top of the network, but the network itself is ambivalent as to the value that humans have assigned to it.

"This time is different"

While it's true that each market cycle tends to come with new narratives, use cases, and reasons for speculation, the booms and busts tend to rhyme. During the mania phase, many new entrants take new types of risks up to the point that the market can no longer support them, and then the market collapses back to a realistic level as expectations re-adjust. What are we seeing this cycle?

Yield generation custodians are facing insolvency and freezing withdrawals to stave off bank runs.

Crypto Exchange CoinFLEX Freezes Withdrawals Due to Counterparty ‘Uncertainty’ - Decrypt
CoinFLEX joins Celsius, Babel Finance, Finblox, and Voyager Digital in either freezing or limiting user withdrawals. Who’s next?

Companies that overextended themselves during the boom are cutting back.

Crypto Industry Layoffs May Have Unintended Consequences - Blockworks
Thousands of employees have been let go at the start of this crypto winter, but layoffs are not necessarily the best option for companies.

Lenders who took on too much risk are blowing up or seeking bailouts.

Bitcoin billionaire Sam Bankman-Fried bails out embattled crypto firms BlockFi and Voyager
Bankman-Fried has emerged as something of a savior for the $900 billion crypto market as it faces a deepening liquidity crunch.

Miners who speculated too heavily and built their businesses based on leverage are forced to liquidate their stash at unfavorable prices.

Public Bitcoin Miners Are Selling Off BTC Reserves as Crypto Winter Sets In - Decrypt
Public Bitcoin mining companies are now selling more than they are producing, but private miner holdings have barely changed since January.

Free markets in action

While there's little doubt that pain, suffering, and losses have been endured by market participants lately, this is a healthy learning lesson.

Folks who built and invested in complex systems that obscured their actual weaknesses were rekt when the systems failed under stress.

Those who played unsustainable games with their capital have lost it as the market shed those risks.

Speculators who leveraged their capital in an attempt to multiply it have been liquidated.

Those who ignored the fundamental risk management principles of this ecosystem that have been learned over the past decade through countless loss events have now learned the hard way by being burned.

Throughout this entire saga, blocks continue being produced.

The fundamentals remain the same

Bitcoin as a system has proven itself quite resilient to all kinds of shocks. Just last year we saw its resilience to a nation-state level attack from the country hosting the majority of hashpower.

In comparison, exchange rate volatility is not a factor to be worried about — other aspects of the system adjust to the exchange rate as needed.

Is Bitcoin Antifragile?
What the tendency of some things to age backwards tells us about the future of cryptoassets.

There will be no mining death spiral; even if some miners are forced out of profitability and out of business, the mining difficulty will adjust until it finds equilibrium and the most efficient miners are profitable once again.

Bitcoin is healing as investors who were chasing yield are doing the math and realizing that 105% of 0 is 0. As such, they are fleeing to the safety of self-custody.

Fiat is doomed

On the other hand, it's hard to be optimistic about the long-term viability of systems controlled by central banks.

M1 money supply of USD
M2 money supply of USD

The long-term trend looks quite clear.

Declaring Bitcoin's demise

The naïveté of outsiders and critics lets them believe they can declare the experiment to be over. But bitcoin is a distributed organism; it only dies when the humans who contribute resources to support it all decide to stop doing so.

As a long-time contributor to this space, I am far from the point of declaring it unworthy of my resources.

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