Bitcoin fundamentals in 3 pictures.

Why back to Bitcoin you may ask. So many things have been written about it already.

We believe this asset is very important and its importance grows every day. At the same time, Bitcoin has been underappreciated recently, so we decided somewhat to go back and cover some fundamentals about it, so investors could see why it's so important to understand Bitcoin more.

We'll do it an easy way - in 3 pictures.

Understanding these three most important concepts will help to go deeper into the rabbit hole and truly embrace the potential of Bitcoin. At least, we hope so.

Hopefully, this article will also support those who already hold Bitcoin, but as it often happens with all of us, especially in the market downturns, doubt it now.

Let's start...

Step 1.

The concept here is that fiat money (money issued by any government) is just "programmed" to devalue. The only question here is the speed of money debasement. The problem today is that with current Debt levels, the speed is increasing more and more.

We could show the amount of money created in recent years, but we would fall from our promise of three pictures, and besides, everyone has seen it. It basically doubled from 2000 to 2020 in the US alone.

Conversely, no central authority can create more than 21 million Bitcoin. Nobody can.

Bitcoin gives you an opportunity to store the value in time and space.

That is a phenomenal function vastly undervalued by many because the function looks like a simple HOLD from an outside perspective. However, that's a crucial function if to think about it deeply.

Worth to mention, that a crucial feature of the bitcoin protocol here is "self-sovereignty" meaning that anyone can self custody of it.

Not your keys, not your coins.

Step 2.

Ok, here, the concept is simple. After people understand Step one, the next question arises - well, nobody uses it (Bitcoin). Only HOLD.

First, as we described earlier, HOLD is a fundamental function of Bitcoin. The design of the protocol allows you to store the value through time (scarcity) and (space) take it with you whenever you choose to go without anyone abling to cease it from you (self custody).

HOLD or HODL - IS A FUNCTION or in other words, by holding it you're using it.

For people to use Bitcoin in daily life, it should first reach a certain point of adoption and transition from a HOLD, "store of value" function to a "medium of exchange" function. The simple picture above shows how one leads to another.

Lightning Network is the key element here to watch as it allows transactions of Bitcoin super FAST and super CHEAP. And we mean it. It allows transactions to be made in seconds for a fraction of a penny. Literally.

Lightning has grown 800% last two years and continues to do so.

Step 3.

Finally, we come to the point where yes, Bitcoin is cool, but there are so many others.

Yes, they are. And some of them are very interesting businesses, and they will probably survive and strive. However, one should treat them exactly like businesses and therefore their tokens as shares.

No matter what they say or pretend (like DAO voting etc) behind each and every one of them there is a team of people who makes changes at will and often hold "master keys."

Even most decentralized, like Ethereum, has Ethereum Foundation, a core team, and Vitalik Buterin almost as a CEO. And if you think they are decentralized... well they had been changing consensus (which is the core of the protocol) so many times before and are going to CHANGE AGAIN many times according to the road map they'd published, that it is hard to rely on as a long term storehold of VALUE.

2023 is going be the year of regulation.

We should get a clear difference between Bitcoin and other Digital Assets in 2023 as regulators finally came to work. Famous

"Bitcoin is not Crypto."

"ONLY Bitcoin hasn't been changed and will not change in the future," the picture tells us.

There are plenty of works out there for investors to deep dive into this asset. Some of our favorites include, but not limited:

Fidelity Digital Assets research: Bitcoin first

#Bitcoin white paper

CFA Institute paper on Blockchains and Bitcoin.

Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.

Disclosure: SeQuant Capital manages BTC on behalf of its clients. Members of our team have exposure to Bitcoin and other digital assets. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any digital asset. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.