Bitcoin is the most fascinating asset in modern finance. It is currently a ‘risk-off’ asset disguised as a risk asset, mainly due to it nascency, its innovation and risks around how the world will receive it as a bonafide asset.
There remain countless unanswered questions in the Bitcoin space around regulation and its role in our existing financial system, but none around what actually is a Bitcoin. Anybody who has spent real time trying to understand Bitcoin, the same kind of time one would spend on understanding other asset classes, quickly becomes extremely positive about the future that it may enable.
The primary reason that Bitcoin is so interesting is that it represents the first truly apolitical settlement system for the transfer of monetary value in existence and that as a monetary asset it is completely non-discretionary in nature. This is in stark contrast to our current financial rails such as Fedwire, SWIFT and the US dollar.
So, the world has a new monetary network, that is global, available 24/7 and has rules enforced by code. A truly fascinating value proposition in the year 2022. We find ourselves in yet another geopolitical mess with Russia in Ukraine, and asset prices all over the world, especially in technology, have reacted poorly to the threat of rising geopolitical tensions.
Tightening up easy money
Let’s not forget that the Federal Reserve has also been threatening that they will take abundant central banking reserves off the table in the coming months, which has also caused asset prices to come under immense strain.
Whilst there is a physical war going on in Ukraine, there is a financial war and race to supremacy happening globally. We are beginning to see the rise of central bank digital currencies, a system in which governments utilise distributed ledger technology to facilitate their national currency.
Digital currency
China is the clear leader in this space with the roll out of the digital Yuan. This technology gives money superpowers, it can be programmed, it can be used as another monetary policy tool and it can export all over the world. More importantly, it comes with levels of control.
Our core view that many countries will soon identify Bitcoin as the only possible candidate that can take on the digital currency. With all the uncertainty globally, we can be confident that every ten minutes bitcoin will add a new block to its ledger, that its inflation rate will remain predictable and in accordance with its predetermined codified issuance schedule.
No single individual or nation state holds any kind of unfair advantage over another. This makes it the first and only truly non-discretionary, apolitical settlement system for the transfer of monetary value in existence today.
