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Justin Bons, founder and CIO of Cybercapital, a European cryptocurrency fund, alerted about the vulnerability of smaller parties in the case of a bitcoin bank run. A price drop event would trigger the hypothetical event, forcing miners to shut down their operations due to unprofitability and affecting network operativity.
Cybercapital CIO Justin Bons Alerts About Bitcoin Bank Run and Its Possible Aftermath
The rise of bitcoin as a possible reserve asset after the rumored adoption of bitcoin as part of a strategic stockpile, and the growing corporate adoption, has experts considering how a bitcoin bank run would develop. Justin Bons, a cryptocurrency analyst and CIO of Cybercapital, a European cryptocurrency fund, has stated that bitcoin would be vulnerable to a bank run given the technical limitations of the first blockchain.
On social media, Bons alerted about how this hypothetical bank run event would affect on-chain users. Due to BTC’s low transaction count, these users could not exit their market positions, as the exit queue for the current 33 million BTC users would be 1.82 months long, presented by Bons through a mathematical analysis.
However, Bons remarked that bitcoin cannot sustain a month’s queue, as transactions get dropped every three days. This would affect smaller parties holding the BTC, while bigger parties that can afford to pay thousands of dollars in fees, would exit their positions first.
Bons argues that a move of this kind would have repercussions on the bitcoin price, as miners would slowly stop their operations due to becoming unprofitable, leaving BTC in a sort of death spiral position. He stressed:
A sudden drop in hash rate can severely affect the speed & capacity of the network, if half the miners left, for instance, block time would also drop in half & the readjustment period could take up to a month!
Bons added that Bitcoin’s security budget of bitcoin is unsustainable and will “likely run out within this decade.” Others have also raised their voices about this issue. Duo Nine, the founder of YCC, stated that with its growing mainstream status, Bitcoin’s security budget and operativity would be affected as part of a “vampire attack” on the chain.
Read more: Bitcoin Facing Potentially Destructive ‘Vampire Attack’ by Third Parties
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