Bitcoin is an “aspirational store of value” and an “insurance policy” against an increasingly precarious financial system, according to a new report from Fidelity Digital Assets, an arm of Fidelity Investments, which holds over $8 trillion in assets.
The report, Bitcoin Investment Thesis: An Aspirational Store of Value, says the leading crypto meets the criteria for being classed as a store of value but has not yet reached the necessary level of acceptance: “Many investors consider bitcoin to be an aspirational store of value in that it has the properties of a store of value but has yet to be widely accepted as such.”
It says the features giving it the potential to be a conventional store of value are its decentralized settlement network and its digital scarcity as a native asset. Furthermore, it says bitcoin’s volatility, which is frequently wheeled out in debates about whether bitcoin is a store of value, could spur adoption because it “attracts attention, development and innovation.”
John Pfeffer of Pfeffer Capital LP, who is quoted in the report, says, “Most people in the world don’t yet see bitcoin as digital gold. As soon as people see it in a different way, the price will adjust.”
Fidelity’s report also focuses on concerns arising from excessive money printing in reaction to the Covid-19 financial crisis, which it says is undermining confidence in the system: “External forces that are accelerating interest and investment in bitcoin include unprecedented levels and exotic forms of monetary and fiscal stimulus globally with unknown consequences. This is exacerbating the concerns that bitcoin was designed to address and is leading more investors and users towards bitcoin as an ‘insurance policy’ that may provide protection against the unknown consequences.”
A quote from John Vincent of Wakem Capital Management highlights the sharp contrast between money printing and the recent bitcoin block reward halving: “You don’t need to be a PhD to understand that the number of dollars just doubled whereas the BTC supply just halved.”
Venture capitalist and veteran bitcoin advocate Chamath Palihapitiya is also quoted: “You quietly over some period of time accumulate a position and then just never look at it again and hope that that insurance under the mattress never has to come due. But, if it does, it will protect you.”
The report also points to the transfer of wealth from the baby boomers to the millennials as a potential adoption driver because as digital natives “younger people view bitcoin more favorably.”
The report concludes: “While bitcoin is not guaranteed to succeed as a store of value, should sustainable long-term demand for the use case not materialize, the tailwinds mentioned above should drive incremental demand for a novel asset with unique properties.
“Additionally, bitcoin’s strength is that it has properties that allow it to serve multiple functions, further hardening the likelihood of its success as measured by growth in value.”