Historical Context

Bitcoin, as envisioned by Satoshi Nakamoto, introduced a peer-to-peer electronic cash system that removed intermediaries, empowered individuals, and enabled frictionless value transfer. While revolutionary, Bitcoin was not initially designed as a store of value. Its reliance on scarcity and collective belief for valuation lacks intrinsic value creation, a feature critical for long-term stability. As a Mark 1 design, Bitcoin’s technology was also constrained by early limitations in scalability, transaction speed, and adaptability.

Bitcoin Wins

Since it's start, Bitcoin has benefited from:

1. Rapid Price Appreciation: Significant growth driven by increasing adoption and its constrained supply.

2. Faith-Based Resiliency: Market trust comparable to assets like art or religion has given Bitcoin durability through belief in its value.

3. Regulatory Framework: Bitcoin previously benefited from regulations that restricted institutional-grade competition, but this may change under the new administration, opening the door for emerging alternatives with superior scalability, efficiency, and economic utility.

Bitcoin Challenges

Despite Bitcoins major wins as a peer-to-peer electronic cash system, Bitcoin also faces challanges.

1. Resilient Architecture: Bitcoin's framework prioritizes stability and decentralization, making it resistant to rapid change. While not entirely immutable, updates are slow and require widespread consensus, raising long-term competitive and security concerns as technology and threats evolve.

2. Scalability, Efficiency & Cost: Bitcoin’s high energy consumption, low transaction speed, and high fees make it inefficient for payments. Its design limits scalability, making everyday transactions slow and costly.

3. Demand Curve Maturation: Without mechanisms to generate intrinsic value, Bitcoin risks stagnation as adoption slows.

   • At $100K, Bitcoin’s path to $1M offers only a 10X return, making it a high-risk asset increasingly dominated by institutions, limiting accessibility for everyday consumers.

   • Bitcoin historically benefited from a regulatory environment that restricted competition, but now faces intense pressure from superior alternatives.

4. Lack of Utility: Unlike gold or property, Bitcoin does not generate functional economic demand. Bitcoin’s value relies solely on scarcity and speculation, with no built-in mechanisms for real economic growth or functional utility.

Value Creation

To serve as a durable and stable store of value, an asset must:

1. Provide Utility: Gold and property offer tangible uses that sustain demand. Meanwhile, art and collectibles offer unique utility through their scarcity, nostalgic appeal and the emotional value they hold.

2. Enable Growth: Intrinsic value mechanisms, such as tethered treasuries, create stability over time.

Bitcoin’s reliance on scarcity and speculative interest may leave it vulnerable to stagnation. Exploring mechanisms like treasury tethering or reinvesting transaction fees could address these risks and ensure its long-term viability.