I still remember the confusion of discovering that there are several different "Bitcoins". This historical comparison documents how I evaluated BTC, BCH, BSV and BTG.
My conclusion was that BTC had the strongest long-term case because of its security, liquidity and network effects. I viewed the smaller forks mainly as shorter-term trading assets.
Let's go over the main characteristics of Bitcoin and which one functions best.
For full transparency: I hold BTC, but none of the others.
The different Bitcoins we're going to look at in this article are the following:
| BTC | BCH | BSV | BTG | |
|---|---|---|---|---|
| Market Cap | 700 Billion | 11.5 Billion | 3 Billion | 1.25 Billion |
| Security | Extremely High | Decent | Bad | Bad |
| Date Of Birth | 01.03.2009 | 08.01.2017 | 11.15.2018 | 11.12.2017 |
| Special Feature | Highly Adopted | Faster Transactions | High Scalability | GPU Mining |
Market-cap source on 09.06.2021: CoinGecko
I focused on how each asset compared as a medium of exchange and a store of value.
What Bitcoin Is Supposed To Do
Bitcoin has two main functions: A medium of exchange and a store of value.
I compared the four assets against these two functions.
A medium of exchange is basically something you can trade for something else - something you can use to buy stuff with.
The U.S Dollar is a medium of exchange because you can buy stuff for dollars.
A store of value is something that remains valuable over extended periods of time. Gold is a common example; this historical comparison of gold's purchasing power provides additional context.
The most important of these is the "store of value" part. That's what people talk about when they call Bitcoin "digital gold". It's why institutions put BTC on their balance sheet and why rich people are hoarding it.
So how do the different Bitcoins do compared to each other in terms of these two functions?
Let's go through them one by one with regards to the two functions above:
The Best Bitcoin As A Medium Of Exchange
First of all_,_ it has to be easy and cheap to transact with for something to be a good medium of exchange.
In other words, a good medium of exchange needs to have/be:
1) Fast transactions 2) Highly scalable 3) Low transaction fees
On the table below, you see how the different Bitcoins compete with each other:
| BTC | BCH | BSV | BTG | |
|---|---|---|---|---|
| Speed | Bad | OK | Good | OK |
| Scalability | Bad | Decent | Good | Decent |
| Fees | Decent | Decent | Good | Good |
All things considered, BSV is a better medium of exchange than BTC, BCH, and BTG.
Interestingly, BTC seems to be the worst. How can this be when it's the highest valued Bitcoin by far?
This is why:
Bitcoin (BTC) will eventually transact using a layer-two solution - The lightning network. It's almost like a shortcut that transactions can take to be faster and cheaper.
The Lightning Network was designed to let BTC handle far more transactions with faster settlement. I expected that to weaken the transaction-speed advantage claimed by BCH, BSV and BTG. (source: Lightning Network documentation)
To summarize:
At the time, I rated BSV more highly on base-layer transaction throughput, while expecting the Lightning Network to improve BTC's position.
The Best Bitcoin As A Store Of Value
After a few years in this market, my personal conviction is that being a good store of value is the most important function of Bitcoin.
**For something to be a good store of value, it has to inherit the following:
It has to be scarce. (There can't be an infinite amount of it flowing around)**
2) It has to be durable (It must not break down over time)
3) It must be hard to make more of it in a short period of time (Must be impossible to overflow the market with more of it)
4) It must be secure (the risk of "losing it" or "it being stolen" must be low)
Let's compare the different Bitcoins for these four points, to figure out what Bitcoin to buy:
| BTC | BCH | BSV | BTG | |
|---|---|---|---|---|
| Scarcity | Fixed cap | Fixed cap | Fixed cap | Fixed cap |
| Durable | Digital ledger | Digital ledger | Digital ledger | Digital ledger |
| Hard To Make More Of It | Protocol-limited | Protocol-limited | Protocol-limited | Protocol-limited |
| Secure | High | Moderate | Low | Low |
They shared similar supply properties but differed substantially in network security. That made BTC my preferred store-of-value candidate.
Another thing to think about is this:
When more capital is invested in a store of value, the liquidity improves. This means that big sell or buy orders have less effect on the price.
Stores of value that swing less due to big buys or sells are favorable to stores of value that swing more.
BTC had substantially more liquidity than BCH, BSV and BTG. I therefore expected large orders to have less price impact in BTC, strengthening its store-of-value case for me.
Recommended reading:
Bitcoin's monetary-system thesis
The assumptions behind a $1 million Bitcoin scenario
Conclusion: Why I Preferred BTC
My conclusion was that BTC had the strongest store-of-value case and that the Lightning Network could improve its usefulness as a medium of exchange.
For shorter timeframes, I treated the smaller forks as more volatile trading assets rather than long-term holdings.
Therefore, the answer to what Bitcoin to buy is this:
For a long-term holding, my preference was BTC. For shorter-term trading, I compared the relative prices and volatility of the different assets.