It is fun to watch narratives change. Over the last few months, we saw a big move away from "Bitcoin is everything". This was espoused for years by Bitcoin advocates. How many times did we see the discussion about Bitcoin's threat to the US Dollar?
Thankfully, that is long dead.
People are starting to realize that Bitcoin is not an effective medium of exchange. Not only does it lack price stability, distribution is already becoming a problem. Those who believe in deflationary currency should realize the failure of this idea.
Without depth and distribution, there is no way for an economy to operate. People need access. This is why there is one international currency: the US dollar. For all the talk of other currencies, none of them match the USD in distribution or sophistication.
Does that mean that Bitcoin is worthless as people like Warren Buffett state? Not at all.
In fact, we are starting to see the narrative match the true center of Bitcoin's value.
Image generated by Ideogram
Jerome Powell: Bitcoin is Digital gold
Wall Street looks at crypto as a different asset class. Actually, that mindset is changing some with the idea of tokenizing real world assets. The reality is that all asset classes will eventually become crypto.
That said, Bitcoin is a special animal. It is a unique asset due to the position that was established.
When it comes to assets, confidence is the name of the game. This means that value is derived from the trust that is associated with it.
This becomes obvious when people lose confidence. What happens? market crash.
Bitcoin is quickly becoming an asset of confidence. This is where the shift to "store of value" enters. An extension of this is "digital gold".
Michael Saylor started down this road a number of months back. I guess he realized the Bitcoin as everything was no longer realistic. For the industry, this was a big fish to flip.
Now, we have one of the biggest in the financial world, the chair of The Fed, mirroring that sentiment.
“Bitcoin is not a competitor for the dollar, it’s really a competitor for gold,” Powell said in a sit-down interview with journalist Andrew Ross Sorkin at the New York Times DealBook Summit in New York.
Powell hit the nail on the head with this one.
Bitcoin: Gold in a Digital Age
Bitcoin has an advantage: it was created in the digital world.
This is a point that gets overlooked. Cryptocurrency in general is going to explode simply due to the fact that its realm is the Internet. We have a monetary system that is native to the online world. As this expands, what happens to cryptocurrency?
The answer should be obvious especially as AI takes over.
When looking at how the world is going to change, and the merging of the digital along with physical due to robotics, the idea of a store of value being yellow pieces of metal make no sense. As we see in most areas, physical attributes are hindrances.
There is a reason why physical cash is no longer the primary means of payments. Bits are much quicker (and easier to deal with) than atoms.
Here is where Bitcoin enters the picture. The fact that we have governments proposing BTC as part of their strategic reserves should put everyone on notice.
Bitcoin has emerged as digital gold. This means that, over the next decade, we will likely see a shift away from the physical asset to the digital one. It will not happen instantly but it is something that will work through the ranks.
For example, Microsoft shareholders are going to take up a vote to see if the company holds part of its Treasury in Bitcoin. Tesla already did this. Other businesses are sure to follow.
Governments. Businesses. Individuals.
It seems the early Bitcoin adopters paved the way. The list of HODLers is only going to expand.
Just like gold, payments are not made using that metal. Bitcoin is following the same path. The difference is we are on the expressway deeper into the digital realm.
In my view, Bitcoin will end up benefiting from this.