Virtual money. Digital gold. Inflation protection and a source of decentralized wealth. These were expressions once used by Bitcoin supporters to describe the advantages of cryptocurrency.
Nowadays, these expressions have been combined into something much simpler, much more generalized: “One Bitcoin equals one Bitcoin“.
This narrative dominates the Twitter posts of investors and analysts amid the cryptocurrency’s collapse in value, highlighting the idea that Bitcoin’s value doesn’t matter.
Given its limited supply, they argue, the cryptocurrency’s price will manage to remain high in the long run.
“The ‘1 BTC = 1 BTC’ expression of Bitcoin maximalists is an analgesic when it comes to the drop in value,” noted former Genesis Trading executive Joshua Lin, highlighting that “these investors are relying on the idea that BTC will turn into a unit of value, so users should simply focus on how much Bitcoin they have available.”
Cryptocurrency market analysts are well aware of the different “forms” that Bitcoin has taken in recent years.
Before the painful for crypto 2022, digital currency advocates were stressing that Bitcoin would replace gold and provide a safe haven against inflation.
Most of these narratives have collapsed this year, alongside the value of cryptocurrencies and the tightening of central bank monetary policy.
Notably, Bitcoin has lost about 60% of its value this year, and is now hovering around $19,000 from nearly $69,000 in 2021.
At the beginning of the pandemic, investors in the cryptocurrency market relied on the idea that Bitcoin, with its limited supply, would be a hedge against rising prices.
However, inflation has proven to be more permanent than transient, while cryptocurrencies have mostly collapsed.
Investors are now trying to invent a new narrative for this digital market, noting that “1 BTC = 1 BTC”.
Ilan Solot of Tagus Capital points out that many users and investors have misunderstood the role of Bitcoins: “BTC was a hedge against irresponsible money printing by central banks, not inflation.”
Nevertheless, “hard-core” crypto advocates remain undeterred since, according to data from FRNT Financial Inc, the percentage of Bitcoins remaining in investor hands and not circulating in the market is at an 8-year high of 68%.
As FRNT’s CEO, Stéphane Ouellette, says, “the narrative is usually created by market movements. The percentage of Bitcoin investors who are not going to sell their cryptocurrencies and who will continue to use them for trading will continue to grow. At some point, BTC will start to react differently from other investment assets.”
Finally, according to Peter Maluk, president of Creative Planning, “it is now clear that cryptocurrencies are not a hedge against inflation and any such moves stem from speculative tendencies.”
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