BTC Trading Pairs stop the Crypto space from moving forward.
In this story I will be making a case for why we need to get rid of BTC trading pairs, and why the crypto-space can not move forward until this process is well underway. The existence of BTC (and ETH) trading pairs on exchanges dramatically distorts the market valuation of every other “alt-coin” and fundamentally undermines the veracity and organic growth of crypto assets.
I expect enormous and well-motivated pushback against this idea and the (frankly unassailable) logic and reasoning behind the desirability of such a move; I will be pre-responding to what I assume will be the most common “arguments” at the end of this article. As should be readily obvious to the reader, those “arguments” are all wrong.
Crypto: The Inevitable Revolution
I am what you might call a true believer. The first time I heard about Bitcoin was back in 2010, and I was immediately and permanently in love with it. Perhaps not with BTC per sé, but the whole concept of decentralized block chain systems was an idea so elegant, so absolutely marvelous and clearly useful that I knew, right away, that the technology behind it was destined to change our world forever.
And Bitcoin… well — Bitcoin will always be the pioneer. Though it soon became apparent how slow and unwieldy it was as a currency, the upside of its architecture is something we can still appreciate today, more than 11 years later; no system in the world has been subjected to more attempts at cracking, hacking or compromising by the most motivated of experts — it has, a few unfortunate but unexploited bugs notwithstanding, withstood them all.
This article will be overflowing with analogies, and that’s after attempts to limit them to those strictly necessary; but if you’ll allow me to compare the Crypto space to the transportation industry, let’s agree to call Bitcoin the steam train. While it might be slow, polluting, noisy and demand the creation of a vast train track infrastructure, compared to transportation as we knew it until then, it was destined to completely revolutionize how we move about, redefine what transportation even means, and enable the creation of whole new concepts and related industries we couldn’t even have thought of while horses were the go-to solution for moving anything from anywhere.
Unhappy with the slow pace of expansion and the high costs of laying down wide tracks everywhere, along came the first wave of competitors like Litecoin; though technically similar, their trains ran on narrow gauge tracks, making it far cheaper to create new connections, albeit with lower volumes and significantly lower traveler revenues. Though this narrow gauge system was appreciated by quite a few, already at an early stage it became apparent that the standard gauge system was going to dominate the nascent industry.
It didn’t take a genius to understand that transportation would never be the same again and that it was destined to change the world as we know it forever.
Inventing new Wheels: Innovation Explodes
Wonderful as this steam train tech may be, very soon, a whole army of engineers started to work on what they believed to be superior systems. Do we actually need those tracks…? Is all that smoke and steam really necessary? I bet we can build something faster! And so the entire community of visionary innovators got to work, and before you knew it, they had invented the automobile, trucks, motorcycles, airplanes and cruise ships. Doing away with coal as the power source, their vehicles were quiet, efficient and far less polluting. A few short years since the first steam train network was laid down, the landscape was now replete with a wide diversity of transportation machines, most of which were significant improvements on the original. Another fine example of human ingenuity for all to see, the revolution, it seemed, had truly arrived.
But did it, really? Though my analogy might be largely applicable up to this point, what comes next makes an absolutely mockery of logic, reason and dare I say the concept of markets itself. That is, of course, because Bitcoin is one particular thing that no other invention has ever been… it’s money. And it is here where our narrative starts to go astray…
Paying for your Airfare in steam trains units
That title sounds absolutely ridiculous, right? Well — that is pretty much how the crypto markets currently work. In the first few years, the only way you could buy a ticket for that cruise to New York is by first getting a piece of steam train, and trade it for the ticket, all the while hoping that the value of your hunk of train would not suddenly decrease (or increase…) by 10% or more. If a train derailed somewhere near Cape Town, or the Russian railways had issues with coal supplies, or when the regulators in India decided to ban trains in Mumbai… the dollar value of your steam train asset could easily drop by a quarter overnight.
Now… that cruise ticket does have some nominal value stated in fiat currency, and if you looked around long enough, you could probably find some small travel agent offering them for Dollars or Pounds Sterling, though, even then, they’d only have a couple of tickets at best, and often the price was noticeably higher; after all, that travel agent might also want to make a quick buck should an interesting steam train buying opportunity present itself.
Ok so — by now you are thinking I surely lost the plot. Dude… what? Why would you use steam trains as a currency to buy other transportation services? Well — if that’s what you’re thinking, then you are ready to understand the point I am about to make. For those who are itching to comment here how I “don’t get Bitcoin” and that it is a currency itself etc. — yes, of course this analogy is slightly tongue-in-cheek. But only a little…
Stablecoins: The solution that can’t win
Because Bitcoin itself is also a currency, it is here that I shall have to drop most comparisons to my analogous transportation industry; however, I encourage you to occasionally return to those examples when you need to assess the merit of my arguments in the rest of this article. You will find that internal logic of the changes I will be proposing holds remarkably well…
So — sometime around 2015 a trio of Santa Monica entrepreneurs introduced the first serious stablecoin, called Tether, or USDT for short. The simple idea was — you send their company a bunch of “real” dollars, and they give you the same amount in USDT in return. Conversely, you can send any amount of USDT back to Tether, and they convert it back to USD, minus some minute fees for the trouble. Now — I don’t want to start a debate on the controversial history of Tether, though I will say that it appears to be one of the very few examples of a business that is constantly thought to be somehow suspect yet for all intents and purposes appears genuinely legit.
Anyway… since then, there has been an explosion of a wide variety of stablecoins, some more successful than others, and a large part of trading now takes place using USDT or USDC pairs. This is great, and has made the crypto markets more accessible, and the prices of those assets paired to stablecoins easier to evaluate.
However… the vast majority of assets (still) have a trading pair with BTC and/or ETH. Though their share in total trading volume on exchanges has decreased substantially, the movement in BTC and ETH prices still have a disproportionate impact on every single asset they can be traded against.
It is this “automatic” influence that must be gotten rid of for the crypto-space to become a serious market in which the usefulness and utility of each individual crypto asset is the primary source of its market value assessment.
The fact that traders have switched in droves to buying “alt-coins” with stablecoins and the speed at which this change has taken place should be seen as very strong indicator of just how appreciated this option really is. Less than 4 years ago, around the last crypto trading boom (fine, FOMO hype…) even large and “mass-adoption”-oriented exchanges like Binance and KuCoin for the most part offered only ETH and BTC pairs. Today, it is exceedingly rare to see new exchange listings without them including at least one stable-coin pair. However, more often than not, they also include a BTC market. It is now time to take the next step and delist those.
And look — I’ll level with you here. It is true that crypto currencies are a genuinely new type of asset. Not strictly a currency, not a real share either, in many cases a utility token and sometimes even a right to vote in a governance system… so, yeah, I am totally happy to admit that trying to accurately put a value on these things is a real challenge. But you know what? The one thing I do know for sure is that valuing them based on the price of the first two major models is not the answer. Allow me to enlighten you why this is so…
The case for delisting BTC and ETH trading pairs
Now — without further ado, allow me to present to you the arguments that should convince any reasonable and rational person that delisting BTC and ETH trading pairs is not only essential to the success of the crypto space, but also economically sound, good for (longer-term) profits, greatly reduces market irrationality and benefits every actor in the chain — traders, hodlers, exchanges and most of all the image of the industry itself!
1. This is the only market in the world where this kind of dynamic exists. There is no other commodity where the prices of the assets not in the top 2 positions are valued by using the price of those top 2. You don’t see prices of a Renault expressed in units of Toyotas, do you now…? Or Fujitsu monitors in HP fractions? You know why you don’t see that? Coz it would be absolutely insane and ridiculous, that’s why! The very term “alt-coin” is a blasphemy… you wouldn’t call Bombardier an alt-plane, would you? Or Dr. Pepper an alt-drink…?
Now there is one market where, to a limited extent, the situation is comparable — which is the Forex currency market, albeit only to a degree; first — a drop in the value of USD or EUR does not (and, no, would not, nice try though…) decrease the value of 80% all other currencies by twice the drop and secondly, crypto-currencies are actually more than just currencies; many represent an ecosystem of services and products that use these currencies as the medium of exchange. In a sense, crypto is a combination of currency, company share and direct utility.
2. The fact that the price (and thus the investment appeal and general evaluation) of an asset that is wholly unrelated to Bitcoin is so strongly tied to the BTC price and the factors that impact it makes a mockery of the entire crypto market. To abuse my analogy again — imagine that the market price of coal has a direct and decisive impact on the value of airline stocks. No, that’s exactly the same. Why should a crypto that deals with, say, NFT sales dive in value because BTC miners thought it an opportune time to sell some of their mining proceeds? If you can explain that with a straight face I’ll gladly witness the verbal acrobatics this requires!
And look, let me hand you an olive branch: ERC-20 tokens depend on the Ethereum network, sure. And so the price of ETH actually has a material impact on their ecosystem, transaction costs, and so on. Trains do indeed deliver tankers full of gasoline so cars and trucks may have fuel too, yes. But to use that relation as a justification of maintaining an ETH trading pair is disingenuous at best; the variation in the price of ETH is not merely due to those factors that are relevant for ERC-20 tokens… but many other things too. I am an equal opportunity olive brancher, so the same comment and minor caveat applies to the BNB token.
3. The influence of the BTC price on the market valuation of “alt-coin” assets discourages potential investments in these alternative systems. After all, why would you consider buying some other coin when the price of BTC can wipe away all the value created by months of genuine hard work and innovation? Only assets that have an ongoing, well-proven and established use case can even hope to escape the frivolities of BTC’s pricing, and even then this only means the blows are lighter; not avoided altogether.
Olive Branch time again: Yes, the crypto space is a new market with dumbass investors that trade in especially silly and emotional ways, and of course this means that this has a massive impact on how rational a market can be hoped to be. FOMO, scams and FUD abound, I’ll readily agree that the crypto trading space is a madhouse at the best of times. But you know what? Let’s not add more confusion and irrelevancies to the mix by allowing BTC pairs to distort things even further. I mean, honestly… in what way is the BTC price genuinely and materially relevant to the vast majority of the assets it impacts..? Come on. Stop acting like the BTC price is like the VAT or the corporate tax rate or the budget deficit (things that do have an across-the-board impact on a variety of economic indicators and valuations) — it’s not. Not even close.
4. Even in a market with perfectly rational agents who do nothing more than constantly adjust their buy and sell prices on BTC pairs to reflect the most accurate USD price, the very best outcome one might hope to achieve is that a BTC trading pair has a net zero effect. In any other case the impact is detrimental. Yes, even if an “alt-coin” rises “for free” on the BTC price going up; for such a rise is not based on the merit of the “alt-coin” but on dumb chance that has no relation to the value of the asset in question. And at any rate, I’ve been doing this long enough to notice that BTC price dips shove alt-coin prices even deeper, but BTC price increases only gently push their alternative brothers up… 10% down on BTC is 20–25% down on alts, 8% up on BTC is sometimes little more than merely a halt to further drops on alt prices… so, yeah.
The cynical explanation: Follow the satoshis
Right… so there you have it. If you are in the crypto space because you believe in the power of decentralized systems to make the world a better place, you are an idiot indeed if you do not find yourself to be in total agreement with the above. However — let’s be honest here now… the next Maynard Keynes, I am not… and so we can be reasonably sure I am by no means the first smart-ass to point this out.
As is often then case when we find that what is going on is not in alignment with what should be going on if logic and reason ruled supreme… there are interests at play with the power to bend the laws of logic so as to maintain some irrational status quo that benefits those doing the bending. So — who are these evildoers and what can be done about them?
Well — how about we start with having the honesty to say that Bitcoin as a system of payment totally and utterly sucks, and that literally all “alt-coins” offer a superior payment processing experience. Yes, every single one indeed. On the other hand, BTC is great as a store of secure value, no question about that. Though Ethereum can be said to be pretty bomb proof too by now… honestly, in terms of security of ones’ funds (purely from a technological point of view) — ETH and BTC are about equally secure. The only thing Bitcoin has that no other crypto asset can even hope to achieve is brand awareness. Ask some dude on the street if he knows what Ethereum is, and you’d be lucky if he’d know many years ago people used ether as a general anesthetic. But mention Bitcoin and even the bum living under the dumpster can tell you it’s digital money.
The truth is… if “alt-coins” would be allowed to truly stand on their own two feet… chances are the actual utility and value of BTC may very well soon drop to not far from zero. I am not saying it would… but it’s certainly a real possibility. As long as… hell — as long as the term “alt-coin” is a thing… and used in common discourse about these assets… BTC can claim to be the one and only, the “true” coin, the original real deal.
The marketing of Bitcoin is very similar to what one might (or, used to…) hear about gold. Solid, tried and tested, though hit the fan the shit might, your BTC/Gold will always save you when you need it most. Relax, I did say marketing.
In the unlikely event you are not convinced…
Look at it this way. Suppose… a bunch of IT experts were tasked with designing a system for the purpose of trading digital assets like electronic currencies. Rules and protocols must be created on how trading works, how each step is executed and secured, and so on. If you would give this task to 50 people, not a single one of them would include the option “Make the price of most assets intimately dependent on the price of the top asset” as a feature. Literally nobody would implement a system like that. You know why nobody would design it that way? Because it doesn’t make any sense! I doubt such a “feature” would even make it on a single list of potential features to consider.
This is far from some disingenuous argument; the only reason the BTC connection currently exists is because BTC happened to come first and has dominated the conversation and media narrative ever since. But that does not mean that this is how we must allow it to remain. This is nonsense. You know it, I know it, anyone with a grasp of common sense knows it. And once you realize that the only reason for this being so is historical, and that anyone tasked with the best possible type of system to allow currency trading would never even think of implementing such a deliberate defect, logic obliges you to conclude it is something we ought to get rid of. No ifs, no buts — it needs to go.
Because as long as this connection remains, the entire crypto space can not be taken seriously. No, not even Bitcoin itself.
