Why Bitcoin Dominates Crypto Despite Minimal Utility

Bitcoin (BTC 4.17%) drew a lot of early attention from investors as a hedge against inflation and a means of decentralization. But is it still relevant today? In this Motley Fool Live segment from "The Virtual Opportunities Show," recorded on May 10, Fool.com contributors Jose Najarro, Travis Hoium, and Demitri Kalogeropoulos examine the real-world utility of this dominant cryptocurrency. 

Jose Najarro: Why's Bitcoin like such a big-known name compared to all the other cryptos, even though it doesn't have, like the utility, like you mentioned with Ethereum, you can do all these things like smart contracts and stuff like that with Bitcoin, it doesn't seem like we could do that, but yeah, this is like the first name we think of when we hear of crypto.

Travis Hoium: Simply because it was first. I think Bitcoin is what started it at all. In the theories behind Bitcoin in the blockchain and decentralization was something that a lot of people bought into, and it's like you get this ball rolling and then people start trading it and then they start making money and then they think it's valuable, and when you go back to first principles, that's what I tried to do with some of these things that would be my argument for not owning Bitcoin is because I'm interested in what you can build with these things and I'm not seeing things being built on top of Bitcoin. I'm seeing them being built on Ethereum and Solana and a whole bunch of other cryptocurrencies have potential advantages there as well.

But it's always something that's evolving too. We know that Block is working on something Bitcoin-related, is that some sort rails that payments can run on, things like that maybe. One of the issues I have with that one specifically is that, it's like the arguments for Bitcoin oftentimes aren't realistic. Like, it's not really decentralized when a huge percentage of it is owned by like 20 wallets. [laughs] It's supposed to be the hedge against inflation, but we've got a ton of inflation right now, and it's dropping like a rock, so some of these things, you could say the same thing about gold though.

Jose Najarro: I think Coinbase is reporting earnings today and I think their earnings share their top three trading. I'm probably going to take a look to see if market sentiment has shifted between the coins and what are they trading at the moment.

Travis Hoium: And so what they have reported typically is transaction volume, and then I think they do transaction volume for the dollar volume of bitcoin, ethereum, and then they just have this other bucket, which would be the 200 other tokens that they do trading on. Bitcoin is typically over time, become less and less important for their trading volume, which is what we're seeing. Like as things are being built on these other blockchains and with these other cryptocurrencies, those are gaining adoption and Bitcoin is sort of losing that market-leading position. I mean that's my thesis over the long term, we'll see if that's that's what continues to play out.

Demitri Kalogeropoulos: I know Berkshire Hathaway CEO Warren Buffett made some comments about Bitcoin at the recent annual meeting? Yes. [laughs] I'm looking at Motley Fool article that described this a little bit and apparently said, "even if it were offered all the bitcoin in the world for $25, he wouldn't take it."

Rachel Warren: I heard that. I was listening to that and I was like, well, OK.

Demitri Kalogeropoulos: Yes, very interesting it's got a couple of this article anyway, I will go into link it in the slider but discusses a few of the reasons that like what Travis mentioned, Bitcoin doesn't produce anything tangible. Just real quick that two, it's not actually currency, and three, he doesn't understand it and it's a good idea to not buy something you don't understand, that's always good advice.