Oldie but goldie: why Bitcoin won’t lose its value anytime soon

“Bitcoin is certainty in an uncertain world,” the mining company Blockware titled its report.

A stock photo featuring a woman inserting Bitcoin coin in a golden piggy bank.

The newer generation of crypto investors tends to disregard Bitcoin in favor of more fancy and social-media-hyped assets. Indeed, there are many altcoins that have behind them the advanced platforms enabling smart contracts, decentralized applications, and self-governance. Standing in their light, Bitcoin looks like a 50-year-old Ford next to the brand-new Tesla with autopilot, karaoke, and smart keys. However, it may be too early to push the “boomer coin” into retirement.

Bitcoin’s simplicity is a virtue, not a flaw

Sometimes an old Ford is better than a new Tesla. Paraphrasing Ethereum co-founder Vitalik Buterin, the system that can survive an unfriendly world has to have a robust and defensible technology focused on simplicity and deep mathematical purity. A 1 MB block size, a 21 million coin limit, and a simple Nakamoto consensus proof of work mechanism that even a high school student can understand is a must for a technology that is “fundamentally all about protecting people.” Voicing his support for the Bitcoin in his essay titled “In defense of Bitcoin maximalism, “ Vitalik reminds us that the early projects in the industry are always the most genuine ones. As profit-seekers are yet to come, the first people involved in developing a potentially disruptive technology are altruistic enthusiasts seeking to improve society.

Bitcoin is a new super commodity

Or at least so claims Blockware in its most recent Intelligence Research Report. As the global economy enters an inflationary decade for the rest of the 2020s, it may be a catalyst for the surging commodity prices. In times of inflation, gold is one of the best-performing commodities due to its unique properties of scarcity, durability, and fungibility. However, according to the Blockware report, Bitcoin surpasses gold in terms of monetary properties since it has no dilution risk, and investors don’t have to trust it to a third party to keep it safe. When the price of gold increases, there’s more incentive to mine it and increase the circulating supply. But this can never happen to Bitcoin since the number of BTC is forever locked at 21 million.

BTC adjusted supply schedule. Source: Blockware
Source: Blockware

In the case of Bitcoin, being just a payment instrument is enough

“Focusing exclusively on being money makes for better money,” says Vitalik Buterin. The less complex a particular technology is, the lower the chance something will go wrong. Buterin also debunks the myth that there’s no way to add “rich statefulness” to Bitcoin. In fact, there was an idea to add covenants to the Bitcoin blockchain, which would allow the deployment of smart contracts, but the community eventually rejected the proposal, favoring minimalism over utility.

“Bitcoin just being money means that Bitcoin requires relatively few developers, helping to reduce the risk that developers will start demanding to print themselves free money to build new protocol features,” adds Buterin.

Holding BTC may be a good saving strategy

“In an uncertain excessive inflationary macroeconomic environment, accumulating Bitcoin is an attractive capital allocation strategy that investors should be utilizing as superior savings technology,” Blockware advises. Citing unnamed investors, the company also claims that Bitcoin will outperform most asset classes on a 4+ year time horizon. And it seems that the TradFi execs share the same opinion. For instance, Fidelity recently announced that it would allow eligible individuals to save up to 20 percent of their retirement fund in Bitcoin. Additionally, a startup called Milo started offering 30-year mortgages backed by Bitcoin, Ethereum, or stablecoins.

Bitcoin becomes boring, and boring is good

As institutional investors start adopting the “digital gold,” it becomes more predictable, and the times of wild price swings are likely to become a thing of the past, a Fidelity executive Jurrien Timmer writes in a Twitter thread. But such predictability is an advantage for further institutional adoption.

“As Bitcoin’s value becomes better understood by more and more investors, there could be more efficient accumulation when Bitcoin swoons, and more determined distribution when it moons. That’s what makes a two-way market,” Timmer writes.

“Remember, price is what you pay, but the value is what you get. In the early days, most investors only knew the price. But as investors better understand valuation, Bitcoin is less likely to resemble the early boom-bust days and could start behaving like a traditional risk asset.”