(Bloomberg) — Virtual money, digital gold, inflation hedge, uncorrelated asset, store of value: those are phrases Bitcoin fans once used to describe the cryptocurrency’s virtues. His new story? Bitcoin is Bitcoin.
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That’s the saying that’s been doing the rounds on Twitter for the past few days, where users, amid a big drop in prices, are posting that 1 BTC = 1 BTC. The idea is that it doesn’t really matter what the price of the coin is. Their supply is steady and that should, in theory, act as a buoy for prices in the long run.
“1 BTC = 1 BTC is what Bitcoin maximalists say tongue-in-cheek when they see the USD BTC price getting too painful,” said Joshua Lim, former head of derivatives at Genesis Trading. “The implication is that BTC will eventually become a unit of account so focus on the total number of BTC you have today.”
Anyone who pays attention to the crypto market is familiar with the many cloaks that Bitcoin has worn over the years. Fans used, before 2022, several stories for the coin, including that it could replace gold at some point, or that it is a great inflation hedge. Most of those stories have fallen by the wayside this year as prices have fallen amid a tightening of monetary policy. Bitcoin has lost about 60% this year and has been trading below $19,000 for the past few days, down from a high of nearly $69,000 at the end of 2021.
When the pandemic first broke out, crypto investors ran with the idea that Bitcoin, thanks to that limited supply, could act as a hedge against rising prices. But consumer price pressures remain sticky this year with prices for most cryptocurrencies falling. Many market watchers say investors are now searching for a new story for the digital asset market. Twitter is flooded with posts announcing that the bottom line is that 1 BTC equals 1 BTC.
Tagus Capital’s Ilan Solot says the Bitcoin-as-inflationary hedging story advocated by proponents is misunderstood. It is wrong to think of it as Bitcoin that is not rising and prices skyrocket. “It’s never really been the case that Bitcoin is an inflation tracker, it’s not TIPS,” he said. “Bitcoin was a hedge against irresponsible money printing by central banks.”
Still, that’s not to say diehard crypto investors are discouraged. The percentage of Bitcoin that hasn’t changed in more than a year is steady — at 68%, the metric is at its highest level since 2014, according to data compiled by FRNT Financial Inc.
Bitcoin is still trapped in the macro environment and its correlation with risk assets has not been broken, said Stephane Ouellette, FRNT chief executive.
“The story tends to follow markets, more often than not,” he said. “When things are correlated, one way of looking at it is the same type of strategic traders involved. Finally, there is a growing and significant percentage of BTC holders who will never sell their BTC and those who use it for commercial purposes. At some point, BTC will start behaving differently from risk assets, but it’s clearly not there yet.
But it’s clear that Bitcoin’s other narratives haven’t come to fruition, said Peter Mallouk, president of Creative Planning. “We now know that cryptocurrencies are not an inflation hedge, it’s proven to us now,” he said. “It’s a great speculative drama for anyone who’s interested.”
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