With the rise of institutionalization in the cryptocurrency world, several big-name financial firms have been offering bitcoin products, prompting many to question bitcoin’s purpose in the grand scheme of things. Is it a store of value like gold, a payment vehicle, an activist’s tool, or, as some have suggested, an unstoppable record-keeping platform?
If the U.S. Securities and Exchange Commission (SEC) approves the exchange-traded funds (ETF) applications from companies like BlackRock, WisdomTree, or Invesco, and supports the new EDX crypto exchange from Fidelity, Charles Schwab, and others, we might begin to see less liberal rhetoric about bitcoin. Financial advisors selling these products will need a more straightforward narrative for their clients.
One possible description is to frame bitcoin as an uncorrelated asset, valuable for diversifying portfolios, as its price moves independently of other assets. However, this is not a satisfying explanation for many, who seek an underlying, event-driven narrative. For instance, bitcoin’s potential as an inflation hedge has been suggested. Though its performance in 2022 may not align with this theory, a long-term perspective highlights bitcoin’s 150x gain over the past decade, providing an effective offset to the dollar’s diminishing purchasing power.
Nonetheless, Wall Street seems likely to adopt the “digital gold” story for bitcoin as an asset that can perform independently of monetary policy. Skeptics may point out the discrepancies in performance between bitcoin and gold during 2022, but the long-term narrative of buy-and-hold retirement strategies should enable financial advisors to push through the criticism.
Notably, the chosen narrative will influence regulatory policy. If bitcoin becomes predominantly viewed as a store-of-value investment, it could strengthen regulatory positions that indirectly curtail bitcoin’s usage growth. Privacy and know-your-customer (KYC) rules may be affected, as institutions accustomed to compliance requirements will have nothing to lose from increased surveillance. This would be unfortunate for those looking to use bitcoin for financial inclusion or as a safe means to move money under oppressive systems.
Increased KYC regulations could also hinder the mainstream adoption of innovative projects such as non-fungible token (NFT) platforms and BRC-20 tokens. Nevertheless, bitcoin’s unstoppable nature ensures that the network will continue to function, regardless of external influences. Increased investment and adoption via ETFs could drive up the price and attract more hashing power, securing bitcoin’s position further.
Ultimately, the intensification of institutional involvement signifies a continuing battle between the financial establishment, which seeks to define and control bitcoin, and bitcoin’s defiance of traditional roles and labels. In this struggle, it appears that the eventual winner will be the unstoppable, boundary-defying nature of bitcoin, rather than the financial institutions attempting to reign it in.
Source: Coindesk
