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February was nothing short of spectacular for Bitcoin. On the back of BlackRock and its constituents, we’ve seen the fabled Bitcoin ETF smash previous ETF inflow records, surprising even the biggest BTC advocates.
For the first time in Bitcoin’s brief history, Wall Street and all its clients now have unfiltered access to the best-performing asset of the past decade in a world where outsized returns are increasingly difficult to come by. What’s more, Bitcoin’s scarcity, in combination with its convexity to the upside, makes it very difficult to acquire during upswings. Essentially, when prices appreciate, potential sellers are less inclined to reduce exposure, creating even stronger upward tailwinds.
Related: Infographic: Bitcoin Enters its 15th Year
The perfect recipe at the perfect time
A lesser explored aspect of what increased Bitcoin and other cryptocurrency adoption is how it’ll impact our relationship, both socially and politically, with money. The best way to describe this is to imagine a dystopian world without fiat currencies as a result of another World War. In such a world, it becomes rather simple to define wealth; namely, those with legitimate, tangible assets become wealthy overnight while those who have, now valueless, paper money would not.
However, the whole reason fiat money was created is because bartering was, and remains to this day, often arduous and impractical due to market inefficiencies. More specifically, in a transaction between Person A and Person B, Person A must ensure that Person B values their ‘money’ similarly to themselves, which in this case could be gold or apples, for instance. What’s more, various parties will value all money differently, making it difficult to truly assess how wealthy any individual might actually be.
Fiat money was created to be the financial bridge that solved market inefficiency. However, in our highly divided world, we have endless forms of fiat currencies. This was reasonable when fiat money was backed by a legitimate asset like gold, but that is no longer the case. Instead, modern money’s value is worth whatever its issuing government says it’s worth. Ultimately whether or not that’s the case depends on whether the broader population agrees. This, in combination with rising geopolitical tensions, started to weigh on the long-term viability of fiat money being a safe store of value given how volatile our relationship as a society with government has changed over time. Argentina and El Salvador are perfect examples of this.
Bitcoin is the best modern solution or proxy for ‘money’ that exists today, and Wall Street knows it. On top of this, Bitcoin is the closest thing to a more practical version of gold. It’s verifiably scarce, no one controls whether or not its holder has it, and it’s ‘relatively’ easy to trade in exchange for a good or service.
Related: Are NFTs Back? Why NFTs Will Make a Comeback in 2024
Bitcoin’s hot girl summer?
While I remain incredibly bullish on Bitcoin, especially as we approach the upcoming halving event, I also maintain that corrections are probable and necessary as we progress toward all-time highs. That said, additional market factors and technicals, on top of increased accessibility to Bitcoin, make a strong argument for price appreciation throughout the rest of 2024.
The biggest difference between this current and previous bull runs is that because of the Bitcoin ETF, countless institutions are now active players in the space. Presently, daily ETF inflows are more than 12x the network’s natural supply. What’s more, portfolio managers (PMs) at asset management firms rapidly acquire Bitcoin but aren’t doing so to trade the market heavily. And why would they? Given Bitcoin’s track record, nearly all long-term portfolios can and should have exposure to the world’s greatest-performing asset. Beyond that, this transformative technology has a market cap smaller than many of the world’s largest companies — it’s still very early!
Additionally, retail investors have yet to return to the market despite reaching new highs. For context, Coinbase was the #1 application in the iOS App Store during the last cycle’s peak. Presently, Coinbase remains outside the top 100. As a result, the upward pressure we’ve seen has been relatively uninterrupted except for Grayscale’s GBTC outflows. However, price action should get whippy as retail and additional leverage enter the system.
Lastly, over-the-counter (OTC) desks are running low on inventory, which is applying even more upward pressure on prices, given that firms are now being forced to pull supply from the market. With 80% of Bitcoin’s supply classified as ‘dormant,’ there are only a handful of routes to acquire the asset. HODL on tight!
Related: How Cryptocurrency Transformed My Small Business — And How It Can Do the Same For You
Conclusion
Before I forget to mention, none of the above should be considered investment advice, and should you wish to get involved with cryptocurrencies, only do so once you’ve done the appropriate research simply because asset prices can be volatile.
However, we’re at what could potentially be the single most transformative revolution of our lifetime. If you’re reading this, understand that you’re early and that there will almost certainly be ups and downs, sometimes more downs, on our pathway to a freer, more financially inclusive world. In the meantime, brace yourself for the turbulence ahead!
