With bond yields approaching zero and most central banks around the world are “releasing water”, investors have to find new wealth storage tools. The current hot cryptocurrency Bitcoin has become the focus of attention.
The research report recently released by Bridgewater, the world’s largest hedge fund company, discussed in detail the development path of Bitcoin as a store of value and other issues.
However, even if it is as strong as a bridge, there is no confidence in predicting the future of Bitcoin.
The appeal of Bitcoin
Although Bitcoin has attractive attributes such as limited supply and global convertibility, under the influence of multiple factors such as Bitcoin’s high volatility, regulatory uncertainty and operational constraints, Bridgewater will remain neutral at present.
However, Rui Dalio, the founder of Bridgewater, still called Bitcoin “a remarkable invention.”
In the report, Qiaoshui pointed out that the limited supply makes Bitcoin particularly attractive during the period when the central bank is printing money.
Similar to gold, Bitcoin has limited uses as a medium for direct exchange of goods and services. Bitcoin, like gold, provides a stable and limited circulation, and cannot be depreciated through printing by the central bank.
Bitcoin’s code is fixed to its total supply of 21 million Bitcoins, and the issuance speed is automatically halved every few years. Although the issuance rate of Bitcoin was much higher in the past few years, its supply growth rate is now lower than that of gold.
In addition, Bitcoin is universal and easy to carry, making it a powerful store of wealth.
Compared with other traditional wealth stores, such as gold, art and real estate, Bitcoin is easier to exchange, especially for individual holders; from a geographical perspective, with Bitcoin exchange services on a global scale With the popularity of Bitcoin, Bitcoin can be realized relatively easily in most parts of the world.
However, the report also pointed out that scarcity alone is not enough to drive demand for an asset, nor is it enough to maintain it as a viable store of value.
Previously, Dalio mentioned in an article about Bitcoin that he recently wrote that although the supply of Bitcoin is limited, there is no limit to the supply of digital currency. The supply of assets similar to Bitcoin should be It will affect the price of Bitcoin and other cryptocurrencies, and new and better digital currencies may appear in the future.
According to the report’s analysis, Bitcoin’s relatively long history, much larger scale, and broader recognition and acceptance, at least so far, have given it a clear advantage.
When to invest in Bitcoin
As for when to invest in Bitcoin, Bridgewater believes that the institutional acceptance of Bitcoin is slowed down by volatility, regulatory uncertainty and the still immature infrastructure.
According to Bridgewater’s analysis, judging from the recent increase in private sector participation, it seems that a large number of people are still using Bitcoin for short-term speculative transactions rather than as an actual long-term savings tool.
If the fundamental purpose of wealth storage is to preserve for a long time or increase its purchasing power, then we think Bitcoin is more like an option-it is still a highly volatile and speculative asset, compared with mature value storage, Bitcoin has not been widely used as a savings tool or reserve asset, and the government or the world’s largest institutional configurator has not yet meaningfully participated.
Compared with gold, Bitcoin’s high turnover rate may reflect its relatively more speculative nature. The trading volume of gold accounts for a small percentage of the total circulation, partly because central banks around the world hold a large share of the total gold supply as a long-term store of value in their reserves.
At present, Bitcoin options have a wide range of pricing fluctuations for future earnings and are very optimistic. Discounting rapidly appreciating prices is a typical bubble behavior, which further illustrates that the Bitcoin market is still very speculative.
Bridgewater believes that whether Bitcoin will be adopted by large institutional investors in the future will ultimately depend on supervision. The regulatory outlook for Bitcoin is highly uncertain.
The U.S. Treasury Secretary stated in an online event organized by the New York Times that using Bitcoin for transactions is an “extremely inefficient way” and that processing these transactions consumes astonishing energy.
When talking about Bitcoin, European Central Bank President Christina pointed out that this is a highly speculative asset. It has carried out some condemned money laundering activities. The need for supervision is an issue that needs to be agreed on a global scale. Because if there is a loophole, it will be exploited by illegal people.
Bridgewater’s main concern is that if there are a large number of central bank digital currencies as officially recognized wealth digital storage in the future, governments may be more willing to limit the competition brought about by Bitcoin as a non-governmental alternative.
In addition, although strengthening supervision may help Bitcoin gain wider institutional acceptance, it may also prompt some large Bitcoin holders to sell off, because what they value is that their assets are not subject to public scrutiny.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.