Bitcoin’s inherent properties have given rise to the perspective that the digital asset could be a store of value, states Fidelity in its latest report on Bitcoin Investment Thesis. It is actually an “aspirational” SoV, creating value as it matures into a store of value.
Fidelity likened investing in bitcoin today to investing in Facebook when it had 50 million users with the potential to grow to the more than 2 billion users it has today.
One of the key arguments against bitcoin being an SoV today is its volatility, but even upward volatility attracts investment, development, and innovation.
But there is no long-term value to store it if there is no sustained demand for the digitally scarce asset and a decentralized settlement network. According to the report, the demand for the digital asset would grow incrementally.
External forces that are accelerating interest and investment in bitcoin include unprecedented levels and exotic forms of monetary and fiscal stimulus globally, which is exacerbating the concerns that Bitcoin was designed to address as such leading more users towards bitcoin as an “insurance policy.”
This is a near-to medium-term catalyst where as many as 285 stimulus measures have been announced in just eight months, including virtually zero interest rates, increasing money supply via QE, and a range of lending facilities.
These measures were taken by central banks and governments to counteract the deflationary pressures created by global lockdowns to mitigate the spread of coronavirus. These restrictions and lockdowns have also propelled deglobalization, yet another catalyst for bitcoin.
“The increase in money supply may translate to an increase in the price of risky or scarce assets,” it reads. In case the combination of policy leads to inflation or if it stays suppressed, but nominal leads stay low or go lower, investors may turn to an asset that maintains its real value and cannot be printed.
Traditionally, investors turn to fixed supply assets like real estate, dividend-yielding stocks, and precious metals. Still, this time they have a new type of fixed supply asset available that has “significant growth potential.”
Simultaneously, the massive transfer of wealth from the older generation to a younger one is a gradual process but an important long-term tailwind, as younger people view bitcoin more favorably. Long-term wealth preservation is yet another factor to drive this demand.
According to WEF’s 2017 Global Shapers Survey, 45% of the 30,000 millennials surveyed said they don’t trust banks to be fair and honest. Edelman’s October 2018 survey of affluent millennials, those aged 24-38 with $50K in investable assets, found 77% of them believe “the whole financial system is designed to favor the rich and powerful.”
There has also been an affinity in millennials towards bitcoin relative to traditional stores of values like gold. About 90% of ETF Store’s millennial clients prefer bitcoin to gold, which they say is “landslide.”