Bitcoin has recently been recognized as a monetary good and an attractive store of value in today’s increasingly digital world by Fidelity Digital Assets, a unit of financial services giant Fidelity Investments. Analysts Chris Kuiper and Jack Neureuter have pointed out that traditional investors often use a technology investing framework when analyzing Bitcoin. This leads them to the wrong conclusion that the cryptocurrency, as a first-mover technology, will easily be supplanted by a superior one or have lower returns.
Bitcoin: A Superior Form of Money
The authors argue that Bitcoin’s first technological breakthrough was not as a superior payment technology but as a superior form of money. They believe that Bitcoin is fundamentally different from any other digital asset, and other cryptocurrencies are unlikely to improve on BTC as a monetary good because it is the most secure, decentralized, and sound digital money.
According to the report, the world’s largest cryptocurrency’s return profile is driven by two powerful tailwinds: “global growth of the broader digital asset ecosystem and the potential instability of traditional macroeconomic conditions.”
Bitcoin and the Digital Asset Ecosystem
The report further explains that the success of the Bitcoin network is not mutually exclusive with the success of other networks. The rest of the digital asset ecosystem can service different needs or solve other problems that Bitcoin can’t. This means that Bitcoin can coexist with other digital assets, each serving its unique purpose in the ever-evolving digital world.
The authors also emphasize that Bitcoin should be considered first and separate from all other digital assets that have followed it. It should be viewed as an entry point for traditional allocators looking to gain exposure to the sector. This distinction highlights the unique value proposition that Bitcoin offers as a monetary good and store of value.
Bitcoin as an Attractive Store of Value
As a digital asset, Bitcoin has several features that make it an attractive store of value. It is decentralized, which means that it is not controlled by any single entity, such as a government or central bank. This decentralization ensures that the value of Bitcoin is not subject to the whims of any particular organization or individual.
Additionally, Bitcoin is highly secure, thanks to its robust cryptographic algorithms and the immense computational power of its global network of miners. This security makes it difficult for bad actors to manipulate the Bitcoin network or steal funds from users.
Furthermore, Bitcoin’s limited supply of 21 million coins and its predictable issuance schedule make it a deflationary asset. This scarcity is a crucial factor in its attractiveness as a store of value, as it means that the purchasing power of Bitcoin should increase over time, unlike fiat currencies, which are subject to inflation.
Conclusion
In conclusion, Bitcoin is a unique monetary good and an attractive store of value in today’s digital world. It should be viewed as a separate entity from other digital assets and considered as an entry point for investors looking to gain exposure to the digital asset sector. With its security, decentralization, and scarcity, Bitcoin has the potential to become an increasingly important part of the global financial landscape.
