Bitcoin: A Battering Hammer That Has Retired After Its Success

Bitcoin was never destined to be the future of money or simply a battering ram in a regulatory battle. As that battle nears its end, the capital that once fueled Bitcoin is quietly pulling back.

For seventeen years, we convinced ourselves that “magic internet money” was the ultimate form of finance. In reality, it wasn’t. Bitcoin served as a regulatory siege engine—a tool built to break down one wall: the refusal of nation-states to legitimize digital anonymous assets.

That mission is largely accomplished. Tokenized U.S. equities have launched, tokenized gold is now legal and expanding, and tokenized dollars have reached a market cap in the hundreds of billions.

In wartime, a battering ram is invaluable. In peacetime, it’s just a heavy, expensive antique.

As financial rails undergo modernization and regulatory approval, the “Gold 2.0” narrative is collapsing. We’re returning to what we truly wanted in the 1990s: tokenized claims on tangible assets.

Prehistory: The Golden Age

To understand Bitcoin’s obsolescence, you must first understand why it was created. It didn’t arise out of thin air, but in the shadow of repeated digital currency experiments being crushed in the same way.

In 1996, E-gold launched. By the mid-2000s, it had amassed around 5 million accounts and processed billions in transactions. It proved a crucial point: the world needs digital anonymous assets backed by real value.

Then the government stepped in and shut it down.

In December 2005, the FBI raided E-gold. By July 2008, its founder had pleaded guilty. The message was unmistakable: a centralized digital gold currency is vulnerable—break down a door, seize a server, prosecute one individual, and it’s finished.

Three months later, in October 2008, Satoshi Nakamoto released the Bitcoin white paper. He had spent years contemplating these issues. In his writings, he pointed out that the fundamental flaw of traditional and early digital currencies was their reliance on trust in central and commercial banks. Experiments like E-gold showed just how easy it was to attack those trust points.

Satoshi had witnessed a real digital currency innovation get “decapitated.” If digital anonymous assets were to survive, they couldn’t be destroyed by “breaking down a door.”

Bitcoin was designed specifically to eliminate the attack vectors that doomed E-gold. It wasn’t built for efficiency—it was built to survive.

War: The Necessary Illusion

In Bitcoin’s early days, onboarding someone felt like magic. We’d have them install a wallet on their phone. When their first coins arrived, you could see the realization on their face: they’d just opened a financial account and received value instantly—no permission, paperwork, or regulation required.

That was a wake-up call. Suddenly, the banking system seemed ancient, and you realized just how constrained you’d been—often without noticing.

At Money 20/20 in Las Vegas, a speaker projected a QR code for a live Bitcoin lottery. The audience sent Bitcoin, building a prize pool in real time. A traditional finance professional next to me remarked that the presenter was probably breaking about fifteen laws. He was likely right, but nobody cared—that was the point.

This was more than finance—it was rebellion. An early Reddit post that topped the Bitcoin charts summed up the feeling: buy Bitcoin because “it’s a way to strike back at the crooks and thieves who just sit in the middle and leech off my hard work.”

The incentive mechanism was flawless. By fighting for the cause—posting, promoting, debating, recruiting—you directly increased the value of your own and your friends’ wallets.

Because the network couldn’t be shut down, it kept growing despite every crackdown and negative headline. Over time, everyone started treating “magic internet money” as the end goal, instead of a temporary workaround.

The illusion ran so deep that even the establishment joined in. BlackRock applied for a Bitcoin ETF. The U.S. president discussed holding Bitcoin as a reserve asset. Pension funds and universities bought in. Michael Saylor convinced convertible bondholders and shareholders to fund billions in Bitcoin purchases for his company. Mining scaled up to consume as much electricity as a medium-sized nation.

Eventually, when more than half of campaign funding came from crypto, the demand for regulatory clarity was finally heard. Ironically, the government’s own crackdown on banks and payment processors helped create a $3 trillion battering ram, forcing its own surrender.

Retreat: When Victory Kills the Trade

Upgraded Rails, Monopoly Broken

Bitcoin’s edge was never just censorship resistance—it was monopoly.

For years, if you wanted tokenized digital assets, Bitcoin was the only game in town. If your account was closed and fintechs feared regulators, Bitcoin was your only path to instant, programmable money.

So we did it. We loved and supported it because there was no alternative.

That era is over.

Look at Tether for proof of what happens when multiple rails emerge. USDT started on the Bitcoin blockchain, but when Ethereum became cheaper and easier, most volume shifted there. When Ethereum gas fees soared, retail and emerging markets pushed issuance to Tron. Same dollars, same issuer, different pipes.

Stablecoins aren’t loyal to any chain—they treat blockchains as plumbing. The asset and issuer matter; the rails are just a mix of cost, reliability, and connectivity. In this sense, the “blockchain, not Bitcoin” camp actually won.

(This references the early meme using a horse-drawn carriage image to mock bank blockchain technology reports; this meaning is preserved.)

Once you see this, Bitcoin’s situation changes. When there’s only one usable rail, everything is forced onto it, and it’s easy to conflate asset value with infrastructure value. When there are multiple rails, value naturally flows to the cheapest, most connected one.

That’s where we are. Most people outside the U.S. can now hold tokenized claims on U.S. equities. Perpetual futures, once crypto’s killer app, are now being adopted by regulated institutions like CME. Banks are supporting USDT deposits and withdrawals. Coinbase is moving toward a combined bank and brokerage model, letting you wire funds, write checks, and buy stocks alongside crypto. The network effects that once protected Bitcoin’s monopoly are dissolving into a general-purpose infrastructure.

Once the monopoly is gone, Bitcoin is no longer the only way to access these benefits. It becomes a product, competing with regulated, high-quality alternatives that better match what people wanted all along.

A Reality Check on Technology

During the war, we ignored a basic truth: Bitcoin is a poor payment system.

We still scan QR codes and paste long, meaningless strings to transfer value. There are no standardized usernames. Transferring value across layers and chains is like running an obstacle course. Send to the wrong address, and your funds are gone forever.

“The currency of the future”

By 2017, Bitcoin transaction fees briefly soared to nearly $100. A Bitcoin café in Prague had to accept Litecoin to stay afloat. I once paid for dinner in Las Vegas with Bitcoin—it took thirty minutes, everyone fumbling with wallets, and the transaction still got stuck.

Even now, wallets frequently fail: balances disappear, transactions hang, funds vanish if you send to the wrong address. Almost everyone who received early airdrops lost them. I personally deleted over a thousand bitcoins—par for the course in crypto.

Pure on-chain finance at scale is daunting. People click “sign” in browsers on code and data they don’t understand. Even established platforms like Bybit have been hacked for a billion dollars, with no recourse.

We told ourselves these user experience issues were just growing pains. A decade later, real improvements came not from elegant protocols, but from centralized custodians. They offered passwords, account recovery, and fiat gateways.

Technologically, the key point is: Bitcoin never figured out how to be user-friendly without recreating the intermediaries it set out to replace.

The Trade Isn’t Worth the Risk Anymore

Once other rails improved, all that remained was the trade itself.

Look at the returns over a full crypto cycle (four years): the Nasdaq outperformed Bitcoin. You took existential regulatory risk, endured wild drawdowns, suffered constant hacks and exchange failures, yet underperformed a basic tech index. The risk premium is gone.

Ethereum did even worse—the area that should have offered the highest rewards for the greatest risk became a drag on performance, while the “boring” index kept climbing.

This is partly structural. Many early holders have their entire net worth in crypto. They’re aging, have families, real expenses, and a natural desire to reduce risk. They sell coins monthly to maintain affluent lifestyles. Tens of thousands of these holders create billions in monthly “lifestyle selling” pressure.

New inflows are different. ETF buyers and wealth managers typically allocate just 1% or 2% as a formality. This money is sticky, but not aggressive. These modest allocations must offset relentless selling by old-timers, plus exchange fees, mining output, scam tokens, and hacks—just to keep prices stable.

The era of “taking regulatory bullets for massive alpha” is over.

Builders Sense Stagnation

Builders aren’t naïve—they know when the technology loses its edge. Developer activity has dropped to 2017 levels.

(This references a chart of “weekly developer commits across all ecosystems”; this meaning is preserved.)

Meanwhile, the codebase has ossified. Changing a decentralized system is intentionally hard. Ambitious engineers who once saw crypto as the frontier now move to robotics, space, and AI—fields where they can do more exciting things than shuffling numbers.

If the trade is weak, user experience is worse, and talent is leaving, the direction is clear.

Error Correction Outperforms Pure Decentralization

The cult of decentralization tells a simple story: code is law, censorship-resistant money, no one can stop or reverse a transaction.

Most people don’t actually want that. They want rails that work—and a way to fix things when they break.

Just look at Tether: when North Korean hackers steal funds, Tether is willing to freeze those balances. If someone accidentally sends a large amount of USDT to a contract or burn address, as long as the original wallet can sign, complete KYC, and pay a fee, Tether will blacklist the stuck tokens and mint replacements to the correct address. There’s paperwork and some delay, but there’s a process—a “human layer” that can recognize and fix mistakes.

This is counterparty risk, but it’s the kind people value. If you lose money to a technical failure or hack, at least there’s a chance of recovery. On the Bitcoin chain, one slip means permanent loss—no appeals, no customer support, no second chances.

Our entire legal system is built on the opposite principle: courts allow appeals, judges can overturn verdicts, governors and presidents can grant pardons, and bankruptcy ensures a single mistake doesn’t ruin a life. We want to live in a world where obvious errors can be corrected. No one wants a system where a multisig bug freezes $150 million in the Polkadot treasury and everyone just shrugs and says, “code is law.”

We also trust issuers more now. Back then, “regulation” meant early crypto companies lost accounts because banks feared losing their licenses. Recently, we saw every crypto-friendly bank seized in a single weekend. The state felt like an executioner, not a referee. Now, regulators have become a safety net. They enforce disclosures, keep issuers within audited structures, and give politicians and courts tools to punish outright theft. Crypto capital is now deeply intertwined with political power. Regulators can’t just destroy the sector—they have to “domesticate” it. Living with issuer and regulatory risk feels far more rational than a world where losing a seed phrase or clicking a malicious signature means total loss with no recourse.

No one really wants a completely unregulated financial system. A decade ago, a broken regulated system made unregulated chaos look appealing. But as regulated rails modernize and add features, the trade-off has reversed. People’s preferences are clear: they want robust rails, but they also want a referee on the field.

From Magic Internet Money to Tokenized Real-World Assets

Bitcoin fulfilled its mission. It was the battering ram that broke down the wall blocking E-gold and every similar attempt. It made it impossible—politically and socially—to ban tokenized assets forever. But this victory brought a paradox: when the system finally agrees to upgrade, the battering ram’s value collapses with it.

Crypto still has its place, but we no longer need a $3 trillion “rebel army.” A core team of 11 at Hyperliquid is enough to prototype new features and force regulatory responses. Once something is proven in the sandbox, traditional finance will wrap it in a regulatory shell and clone it.

The main trading strategy is no longer to put a huge portion of your net worth into “magic internet money” and wait a decade. That only made sense when rails were broken and the upside was obviously huge. “Magic internet money” was always a strange compromise: pure rails, wrapped around assets supported only by a story. In future articles, we’ll explore what happens when these same rails carry claims on truly scarce real-world goods.

Capital is already shifting—even crypto’s “unofficial central bank” is changing. Tether now holds more gold than Bitcoin on its balance sheet. Tokenized gold and other real-world assets are expanding rapidly.

The era of “magic internet money” is ending. The age of tokenized real-world assets is beginning. Now that the door is open, we can stop worshipping the battering ram and focus on the assets and trades that really matter on the other side.

Statement:

1. This article is republished from [Foresight News], with copyright belonging to the original author [Pillage Capital]. If you have concerns about this republication, please contact the Gate Learn team, and we will address your concerns promptly in accordance with our procedures.
2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute investment advice.
3. Other language versions of this article are translated by the Gate Learn team. Please credit Gate when sharing or referencing translated articles.