This is an opinion editorial by Christopher Louis Tsu, the CEO of the Venom Foundation and an entrepreneur with a background in finance, technology and macroeconomics.
Regardless of one’s own view of whether bitcoin is a financial asset or an established form of money, one thing is clear: it is up to the market to decide bitcoin’s role. The collective power of invested capital and the liquidity of the market are always the main factors.
A Warm Embrace For Bitcoin, With Limitations
Bull market or bear market, Bitcoin is rarely out of the news. But it’s safe to say that 2023 will be a particularly bubbly year in the BTC news cycle. BlackRock, the world’s largest asset manager with $9 trillion in assets under management (AUM), is applying for a spot bitcoin ETF, with CEO Larry Fink calling BTC “an international assets.” Additionally, many other august financial institutions have put their hats in the crypto ring with Bitcoin as their focus.
Many of these entities have bought into the “digital gold” narrative of the asset, pioneered by early maxis and later popularized by Michael Saylor of MicroStrategy. Instead of focusing on the use of money, this approach sees bitcoin as a long-term investment vehicle, inflation hedge and store of value.
The warm embrace of prominent market players shows how far bitcoin has come as an asset. There are many signs and stage poles along the way, of course, and some have been less consequential than others.
Two years ago, for example, Starbucks made it possible to buy coffee with bitcoin through a partnership with digital asset company Bakkt. Some applauded this important news while others shrugged. The truth is, I don’t see people flocking to pay for their Ristretto Bianco with their favorite cryptocurrency. The reason is not because of the underlying technology, or regulations – and certainly not because the staff have trouble noting the wallet number on the cup. This is because of the only thing about bitcoin that no one can guarantee a fix for the future: its price volatility.
At the risk of stating the obvious, BTC is still not an instrument for buying coffee – although the ability to exchange sats for a service is great. What Bitcoin represents is the evolution and adoption of a dynamic digital asset class. Every year, network effects multiply and former claims of illegitimacy become progressively more ridiculous. Often, an old quote from NYSE Chairman Jeff Sprecher comes to mind: “Somehow bitcoin lived in a swamp and survived.”
What is Money?
But who are we to say what money is? To paraphrase two quotes from Former Federal Reserve Chairman Alan Greenspan (one of which makes me laugh while the other makes me think):
“I understand the history of money. If I get some, it will soon be history.”
“It is no longer possible to clearly define money, with the constant expansion of financial instruments.”
These comments were both made more than 20 years ago, and as the sophistication of financial markets and products continues to expand, the definition of money and its role in the world is more nuanced than ever. You could argue that it doesn’t matter if bitcoin is considered money; the fact that it is considered valuable is all that matters.
It can be good that both Bitcoin maxi and Wall Street is right, that bitcoin is both money and a long-term store of value. In the near future, BTC will (probably) be firmly categorized as an asset class in itself, and various financial products will be derived from the underlying intrinsic value. Subsequently, wholesale investors can take advantage of the advantages of transferring large amounts with reduced counterparty risk and instant settlement, all done peer to peer, removing much of the unnecessary friction. . Individuals, on the other hand, will continue to use bitcoin as they see fit.
But here’s the rub: Although the technology is more or less ready, the regulation is not. Globally, regulation of cryptocurrency, particularly bitcoin as well as the broader blockchain technology infrastructure, is playing out. In some regions, such as the United Arab Emirates, Switzerland and Singapore to mention a few, regulators have made bold decisions on digital assets supported by blockchains (hat tip to Abu Dhabi Global Market [ADGM] in my hometown). My prediction is that the water will find its own level and participation will grow exponentially as we move forward.
In closing this letter, I must repeat that the markets are smarter than all of us – and capital goes hand in hand with the market. Sovereign countries always want to be part of the market economy and get a piece of the capital pie! Whatever happens, don’t expect the Bitcoin business to die (much less die) anytime soon.
This is a guest post byChristopher Louis Tsu. The opinions expressed are their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.