Bitcoin Faces ‘Bank Run’ Risk, Cyber ​​Capital Bond Warns

Bitcoin (BTC) may be at risk of a dangerous “bank run,” according to Cyber ​​Capital's founder and CIO.

Banking is when customers withdraw their deposits from a financial institution due to fear of bankruptcy.

Bitcoin can't handle mass withdrawals, Bones says

In a detailed social media thread, Bones highlighted critical flaws in Bitcoin's transaction capabilities, self-hedging model and network security. In his opinion, these can lead to a crisis that will destabilize the network and destroy investors.

Bonus analysis focuses on Bitcoin's limited transaction processing capacity, which is calculated at seven transactions per second (TPS). Using data from Glassnode and the Bitcoin code, he argued that Bitcoin's 33 million users on the chain would face bottlenecks if a mass shock triggered simultaneous withdrawals.

“At this rate, the queue would be 1.82 months long under ideal conditions. But, in reality, transactions get stuck, and smaller parties can't get out unless they pay exorbitant fees.”

Bones warned that this limitation could lead to a “death spiral”. The resulting delays could exacerbate the panic, creating a vicious cycle of hashrates dropping, block times lengthening, and prices falling.

In his criticism of BTC, Bones says that Bitcoin's transaction potential is insufficient for real-world use. He even compared Bitcoin's 7 TPS to other systems, such as Visa's 5,000 TPS or 10,000 TPS, without paying for decentralization.

There are ZERO use cases that can be supported with 7 TPS. Mass self-preservation on BTC is a dangerous narrative. “The only shift for BTC adoption is centralized custodians and banks, which goes against the very nature of ‘liberty money,'” he said.

Bones has questioned the long-term sustainability of Bitcoin, citing its dwindling security budget. This, in his opinion, is a critical issue that can exacerbate the dangers he lists. The thread explores the uniqueness of Bitcoin from its original perspective as a “peer-to-peer (P2P) electronic currency.” The network's limitations and management have turned it into a speculative asset rather than a viable means of exchange, he lamented.

Bones' comment sparked a heated debate on X (formerly Twitter). Self-proclaimed technology expert Patrick Flanagan refutes the claims.

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

Boon countered that the risk increases as the number of users increases. A few of the users even pointed out that it might crash and the problem gets worse as the network size increases.

Other users have highlighted potential options, such as trading wrapped bitcoin (WBTC) on Ethereum, which bypasses the limitations of Bitcoin's base layer. Bones acknowledged this, but explained that locked-in BTC users can exit quickly when on-chain users are locked out, which exacerbates the sell-off. The discussion also extended to Bitcoin's self-sustaining model.

“This is something that self-defense advocates need to pay attention to. One bit of FUD and everyone is stuck with their money,” said Dash Pay's Joel Venezuela.

Bones acknowledges the difficult position he finds himself in as a cypherpunk and self-preservation advocate. Another user brought up the comparison to gold, asking how long it would take to liquidate international gold holdings. While gold has practical limitations, its theoretical transaction capacity far exceeds that of bitcoin, making it vulnerable to such bottlenecks.

Critics of Bohn's analysis argue that Bitcoin has weathered similar threats in the past. However, his warning adds to the growing number of voices calling for a re-evaluation of Bitcoin's scalability and usability.

Despite his bleak outlook for Bitcoin, Bones is optimistic about the broader cryptocurrency space. “There's a lot of hope for cryptocurrencies in general,” he concluded, noting that Bitcoin's original ethos is now flourishing in other blockchain projects.

Meanwhile, while Bitcoin remains the dominant cryptocurrency, debates over its growth and recovery continue. Bohn's warning serves as a stark reminder of the challenges bitcoin faces as it seeks wider adoption in a volatile financial space. Elsewhere, Galaxy CEO Mike Novogratz could make similar reservations about bitcoin stocks in the US.

“I think it would be very smart for the United States to take their bitcoin and maybe add some to it,” Novogratz said.