There are three narratives often used to describe Bitcoin—that it’s entering a new bull run, it’s a tulip mania, or that it’s comparable to the dotcom bubble. But there is a fourth more pessimistic scenario for BTC, according to Zcash founder Zooko Wilcox.

1) Market is in a new bull run

This scenario most commonly touted by influential cryptocurrency pundits is the bull case. People think the “good times are about to come roaring back,” as Wilcox aptly put it. That Bitcoin is in its “fourth parabolic phase” and ready to explode unlike any asset before it. The primary support for this theory is speculation around the influx of institutional money and exponential user adoption.

Developments such as Fidelity making Bitcoin available to institutions, Bakkt and others creating BTC-settled futures, the rapid growth of Grayscale’s Bitcoin trust, and record paper BTC futures sales all support this narrative.

The bull view is maintained by some of the most respected influencers in crypto, including Anthony Pompliano, Thomas Lee, Peter Brandt, and Pierre Rochard. But, as Wilcox pointed out, these pundits may be vulnerable to overconfidence because they’re “shilling their bags.” In other words, most advocates tend to have enormous Bitcoin holdings that may impair their objectivity.

Additionally, this perspective is over-emphasized by crypto media. All but the most radical bears, like Nouriel Roubini, receive any media attention whatsoever while more moderate skeptics are largely ignored.

2) Cryptocurrency is a tulip mania

Two historical bubbles are often likened to the crypto markets. The Dutch tulip mania of the 17th century and the U.S. internet tech-stock bubble of the late 1990s.

The Dutch tulip mania was a period where prices for bulbs of fashionable tulips skyrocketed internationally and then dramatically collapsed. Historians consider the event the first recorded speculative bubble.

At its peak, some tulip bulbs sold for more than 10 times the annual income of a skilled craftsworker. The modern equivalent would be as if a collectible was worth half a million dollars. According to critics, the tulip mania and Bitcoin have much in common, with critics alleging neither provide “real value.”

Oftentimes, hard-line skeptics assert that the price appreciation of Bitcoin depends on the Greater Fool Theory, where prices increase not based on growing utility but on the expectation that it can be resold to another ‘fool’ at a higher price.

Warren Buffett expresses this view for both gold and Bitcoin. Bitcoin is an “unproductive asset” that does not fit into his value investment thesis. Others, like Nouriel Roubini, claim Bitcoin doesn’t make any economic sense whatsoever, that it can’t work, and that its value will go to zero.

Several theories are used to justify why Bitcoin will implode, varying from unsustainable energy consumption from mining, system-breaking volatility, and lack of uptake as a medium-of-exchange.

“Bitcoin—or any cryptocurrencies—should be a serviceable unit of account, means of payments, and a stable store of value. It is none of those things,” said Nouriel Roubini in a written testimony to the U.S. Senate. “No one prices anything in Bitcoin. Few retailers accept it. And it is a poor store of value, because its price can fluctuate by 20-30 percent in a single day. And since its price has been so unstable or volatile almost no merchant will ever use it as a means of payment.”

Like the tulip mania, Roubini is convinced Bitcoin has “no value” and that its price is artificially driven by speculation and charlatans. This is the “stupid” bubble stance, according to Wilcox.

Although Bitcoin certainly has its flaws, and some criticisms—such as difficulties scaling—are justified, there is also a meaningful amount of evidence supporting the idea that BTC sees real use and provides legitimate value. Mining is likely sustainable (so long as Bitcoin retains meaningful market share), BTC is an innovation for large international settlements, and the crypto asset is a promising censorship-resistant store-of-value.

Subscribe to CryptoSlate Research for our next edition covering Bitcoin’s fundamental value proposition and evidence supporting this stance.

3) Blockchain is the second dotcom bubble

The dotcom bubble was a period in the U.S. equities market where technology stock prices, fueled by speculation around the then-nascent internet, caused the Nasdaq index to more than quadruple in five years.

In 2001, the bubble burst. Its collapse shook the stock market and purged many of the companies that raised at ridiculous valuations. Blue-chip stocks like Intel, Cisco, and Oracle lost more than 80 percent of their value. It was 15 years before the Nasdaq returned to its former peak.

Amazon is the often cited comparison in the crypto-sphere. AMZN peaked in late 1999 at $90 a share. Two years later when the bubble burst it briefly traded at $6 a share. It wasn’t until 2007 that the stock broke old highs, with a single share of Amazon now priced at $1,988.

Tech-minded influencers and several venture capitalists—like Dan Hedl, Dovey Wan, and Erik Voorhees—seem to share this outlook on the market.

11/ In an analogous vein, the dotcom bubble was an extinction event that wiped out exuberant companies, but fundamentally sound ideas survived, a large variety of which are to be found today (ex: Amazon). — Dan Hedl (@danheld) January 23, 2019

During the 2017-18 bull market the industry was saturated with scam ICOs, nonsensical ‘decentralized’ startups, and outlandish blockchain company valuations. The ensuing “crypto winter” was necessary to cleanse the sector, pundits claim. And, like Amazon in the 1990s, the strong would survive, rising from the ashes to yield eye-popping returns.

4) I have a dream that one day…

There is, however, a fourth narrative. Bitcoin’s “fading dream,” where the protocol does not grow beyond its niche and lives—indefinitely—as an “unimportant” tool for hobbyists. Such a fate would mirror the free and open-source software (FOSS) or peer-to-peer technology movement, said Wilcox. In other words, a “failure to find product-market fit.”

10/ This is the one I'm afraid of! I contributed to the project of empowering everyone with Linux/FOSS and P2P for years — decades — as it faded from a dream to a joke. That could happen to Bitcoin/crypto, too, and it's our job to realise the potential this time. … — zooko (@zooko) December 3, 2018

Netscape was one piece of software that failed to find its niche. Its founder, Marc Andreessen, defined product-market fit as: “being in a good market with a product that can satisfy it.”

Other examples of products that were conceivably good ideas but failed to secure product-market fit include the Segway, Google Glass, and the Pebble smartwatch. Meanwhile, Wilcox cited Linux as the largest example of FOSS that had large ambitions but still failed. We reached out to the Zcash founder for a more detailed explanation.

Going the way of Linux

Wilcox was, and still is, involved in open-source software projects. One of which was Linux’s free operating system, Ubuntu. When Ubuntu launched, its “bug number one” was that “Microsoft still has majority market share,” he wrote in a message to CryptoSlate.

“And not just Microsoft, but to replace Apple, and Facebook, and Google, and everything! To make everyone free. It had a great deal in common in terms of its scope and its spirit to the current decentralization movement.”

Linux was not just a free and open-source operating system. Like Bitcoin, it was a social revolution, said Wilcox. Yet, Linux “totally failed,” and cryptocurrency could succumb to a similar fate.

“The fact that Linux failed at that [by failing to become the predominant operating system] and became useful only for proprietary monopolies like Facebook and Amazon and Google to run their proprietary monopoly systems more efficiently is a total failure of the mission.”

This “failure” is not widely recognized—the Zcash founder explained:

“Sadly, when social movements fail, they often revise history to claim that they are succeeding, such as the pathetic example of FOSS/Software-Libre advocates today pointing to the way Linux lives inside Google’s Android as an example of success.”

The next social revolution?

That isn’t to say Bitcoin isn’t resilient or promising (despite the bleak comparison). In a 2011 letter Wilcox wrote after the markets tanked from the Mt.Gox hack:

“I’m not hereby predicting that the price will rise further, I’m saying that the fact that the currency is still traded at all is remarkable! No other digital money design to date could have kept on ticking after taking such a beating.”

Based on the available data and Bitcoin’s 10-year track record, it seems increasingly unlikely that the Bitcoin network—from a technical standpoint—will fail. So long as the network is running coins will continue to hold some value above $0, in spite of the claims from doomsayers.

Unlike other open-source software movements of the past, Scott Dudley, a veteran software developer and CryptoSlate contributor opined:

“Open-source software improves incrementally. And very slowly at that. I have never seen an open-source software with the excitement and rate of adoption around it that Bitcoin has. And that speaks to the vitality of the movement.”

If Bitcoin is to become the revolution that technologists and bull-speculators envision, then there are distinct hurdles the community and tech must overcome.

The movement could be appropriated by the large corporations like Facebook or JPMorgan. Exchanges could face increasingly onerous regulations. Scaling issues could cause acceptance as a medium-of-exchange to stall. Institutions and exchanges may face growing government restrictions.

All of these issues have the potential to slow Bitcoin’s momentum. If slowed sufficiently, the decentralized ledger may never gain the critical mass necessary for international salience.

Ultimately, the issue is less about objective failure and more about people’s expectations. Bitcoin could conceivably be relegated to a role as a niche asset for saving and sending large amounts of wealth. But, if Bitcoin really is a radical social movement, then anything short of replacing the financial system and toppling the central banks is a failure.