Bitcoin (BTC) may be at risk of a catastrophic “bank run,” according to Justin Bons, founder and CIO of Cyber Capital.  

A bank run is when customers withdraw their deposits from a financial institution over fears of insolvency. 

Bitcoin Cannot Handle Mass Exits, Bons Says

In a detailed social media thread, Bons highlighted critical flaws in Bitcoin’s transaction capacity, self-custody model, and network security. In his opinion, these could lead to a crisis that would destabilize the network and devastate investors. 

Bons’ analysis centers on Bitcoin’s limited transaction processing capability, which he calculated at approximately seven transactions per second (TPS). Using data from Glassnode and Bitcoin’s code, he argued that Bitcoin’s 33 million on-chain users would face a bottleneck if a mass panic triggered simultaneous exits. 

“At this rate, the queue would be 1.82 months long under optimal conditions. However, in reality, transactions would get stuck and eventually be dropped, making it impossible for smaller parties to exit unless they pay exorbitant fees,” Bons explained.

Bons warned that this limitation could lead to a “death spiral,” where a price crash forces miners to shut down, slowing the network further. The resulting delays could deepen the panic, creating a vicious cycle of declining hash rates, prolonged block times, and falling prices. 

Further in his critique of BTC, Bons claimed Bitcoin’s transaction capacity is insufficient for real-world use. He compared Bitcoin’s 7 TPS to other systems, such as Visa’s 5,000 TPS, or even competitors in the crypto space that exceed 10,000 TPS without sacrificing decentralization. 

“There are literally ZERO use cases that can be supported by 7 TPS. Mass self-custody over BTC is a dangerous narrative. The only scalable path forward for BTC adoption is through centralized custodians and banks, contradicting its ethos as ‘freedom money’,” he stated.  

Bons also questioned Bitcoin’s long-term sustainability, citing its shrinking security budget. This, in his opinion, is a critical issue that could exacerbate the risks he outlined. The thread also touches on Bitcoin’s deviation from its original vision as “peer-to-peer (P2P) electronic cash.” He lamented that the network’s constraints and governance have turned it into a speculative asset rather than a practical medium of exchange. 

Bons’ remarks ignited a heated debate on X (formerly Twitter). Patrick Flanagan, a self-described tech expert, dismissed the claims.

“This is pure fantasy. If this was going to occur, it would have occurred years ago,” Flanagan argued.

Bons rebutted, asserting that the risk increases as the number of users grows. He noted that even a fraction of users leaving could trigger a run and added that the larger the network gets, the more severe the problem becomes.

Other users highlighted potential alternatives, such as trading wrapped Bitcoin (WBTC) on Ethereum, which bypasses Bitcoin’s base layer limitations. Bons acknowledged this but noted that wrapped BTC users could exit quickly while on-chain users would be trapped, exacerbating the sell-off.  The discussion also extended to Bitcoin’s self-custody model.

“This is something that self-custody advocates should pay attention to. One tiny bit of FUD and everyone gets their money stuck,” DashPay’s Joel Venezuela remarked.

Bons responded, acknowledging the difficult position he finds himself in as a cypherpunk and self-custody advocate. Another user raised a comparison to gold, questioning how long it would take to liquidate global gold holdings. Bons countered that while gold also has practical limits, its theoretical transaction capacity far exceeds Bitcoin’s, making it less susceptible to such bottlenecks. 

Critics of Bons’ analysis argue that Bitcoin has weathered similar concerns in the past without collapsing. However, his warning adds to a growing chorus of voices calling for a reevaluation of Bitcoin’s scalability and usability. 

Despite his grim outlook for Bitcoin, Bons remains optimistic about the broader cryptocurrency space. “There is much hope left for cryptocurrency as a whole,” he concluded, suggesting that Bitcoin’s original ethos now thrives in other blockchain projects. 

Meanwhile, while Bitcoin remains the dominant cryptocurrency, debates over its scalability and resilience continue. Bons’ warning serves as a stark reminder of the challenges Bitcoin faces as it seeks broader adoption in a changing financial space. Elsewhere, Galaxy CEO Mike Novogratz has almost similar reservations about a Bitcoin reserve in the US.

“I think that it would be very smart for the United States to take the Bitcoin they have and maybe add some to it… I don’t necessarily think that the dollar needs anything to back it up,” Novogratz claimed.

Bitcoin continues to record significant price leaps following a 19.28% gain in the past seven days. The premier cryptocurrency is replicating another bullish Q4 particularly boosted by multiple factors as it gradually approaches the $100,000 price target. However, crypto analyst Ali Martinez has revealed a vital condition for the market bulls to sustain the current momentum.

Why $91,900 Is Crucial To Bitcoin

Donald Trump’s electoral victory coupled with recent Federal Reserve rate cuts have spurred Bitcoin to multiple all-time highs over the last two weeks. On Thursday, the crypto market leader hit a new peak of $93,434 and has since retraced by 2.25% to remain in consolidation above $91,000. 

Commenting on Bitcoin’s future price movement, Ali Martinez shared that the TD Sequential, a trading indicator for identifying trend exhaustion and market reversals, had recently flashed a sell signal indicating that BTC may be due for some significant price recorrection.

However, the analyst explains the leading cryptocurrency can avoid such a downturn if the market bulls ensure a daily close above $91,900. Martinez states that holding this price level would allow Bitcoin to maintain its current trajectory and potentially climb to $100,680.

Bitcoin To Fall Or Not? 

Martinez’s predictions counter wider beliefs that the premier cryptocurrency is set for a re-correction following a prolonged price rally that has lasted since early October. 

In a separate post on X, the analyst notes the Bitcoin Long/Short ratio currently stands at 0.79 with 55.94% of traders opening short positions in anticipation of a price fall. Bitcoin’s relative strength index also remains above 70, signaling it’s in the overbought zone and is due for a price reversal. However, the asset’s price is also well above its 20-SMA showing potential for a trend continuation. 

Moreover, the impending return of Trump to the White House which is expected to usher in new pro-crypto appointments in terms of agencies such as SEC and CFTC also continues to spur investors who will now anticipate a less regulatory hostile regime. This factor, combined with the ongoing impressive performance of the Bitcoin spot ETFs which have now accumulated total inflows of $6.18 billion in Q4 2024. Therefore, the premier cryptocurrency may remain yet resilient reaching another all-time high in no time.

At the time of writing, Bitcoin trades at $91,166 reflecting a 2.10% in the past day. Meanwhile, the asset’s trading volume is down by 18.88% and valued at $68.54 billion.

Featured image from Medium, chart from Tradingview

A financial research company analyst expects Bitcoin to continue its price surge until year-end as it rides on bullish technical indicators and increasing market demand.

In a CNBC interview uploaded via YouTube, Fundstrat’s Tom Lee shared his thoughts on Bitcoin’s continuing dominance in the context of incoming US President Donald Trump’s convincing election.

Bitcoin’s price is currently trading at the $91k level, and Lee expects that the top digital asset will consolidate near the $90,000 level, with its technicals setting it up for a sustained run.

According to technical analysts, Bitcoin is on its fifth Elliot Wave cycle, indicating an expected rise, with a price of $130k to $145k by year-end. According to Lee, Bitcoin can easily target this price with increasing market volume and a friendlier monetary policy from the Federal Reserve.

Lee Explains Why Bitcoin’s Rally Continues

In a CNBC interview, Lee explained that increasing market demand and solid technical indicators support Bitcoin’s recent price surge. He noted that Bitcoin is now in a consolidation phase and will likely stay at the $90,000 level.

Bitcoin’s price, he says, aligns with the price action of other risk assets. But Bitcoin is different because it’s more stable and shows resilience. According to Lee, Bitcoin thrives in a risk-taking environment, and the political and economic landscape favors the digital asset.

Major indices like the S&P 500 and NASDAQ have dipped on support levels, which offers a solid foundation for future growth. The same trend is happening for Bitcoin, suggesting that the asset is primed for another surge.

Lee also linked Bitcoin’s price performance with other market trends, including a “Trump trade.” He argued that Trump’s election was key in boosting the asset’s price. Then, there’s the recent confirmation of establishing the D.O.G.E., which aimed to promote efficiency and deregulation in the government.

BTC As A Strategic Reserve Asset

Lee pointed out that the proposals to make Bitcoin a strategic asset are also helping boost its market volume and price. Bitcoin can serve as a hedge against macroeconomic uncertainties, including inflation. He added that the current debates on the direction of US monetary policies, like cutting interest rates, are helping the crypto’s price.

Meanwhile, there’s an ongoing discussions on who will be the next Treasury secretary, which can also influence prices. Howard Lutnick of Cantor Fitzgerald is one of the leading names considered, advocating for Bitcoin’s legitimacy.

Increasing Retail And Institutional Support Pushing Bitcoin’s Price

Lee also suggested increasing support among retail and institutional investors, driving Bitcoin’s price. Based on data by CryptoQuant, Coinbase’s premium index increased at the rally’s start, suggesting surging interest from US retail investors. However, these numbers have dipped recently, reflecting a slowdown in retail action.

For Coosh Alemzadeh, Bitcoin’s current price chart and technicals suggest future growth. He added that Bitcoin is at its fifth wave of the Elliot Wave cycle, which is at the peak of a price surge. Based on his projection, BTC’s price can reach $145k by year-end.

Featured image from SCMP, chart from TradingView