Bitcoin and TradFi: a Match Made in Heaven?
As a tokenomics accelerator, we look to many projects for their technological attributes. Minting, token supply, buy/sell pressure; all of these are things are important factors to consider when designing a token project. Perhaps one of the largest of these factors when considering the tenacity of a project is that of deflationary forces, and the OG of these deflationary tokens is the OG itself: Bitcoin.
Bitcoin has been thrust into the public eye once again as institutional players and federal regulators have begun to reshape the landscape. The future of Bitcoin, given its recent rallying past the $30k mark, appears bright, bolstered by substantial institutional interest and increasing recognition from central bank officials.
One can’t ignore the crucial role played by BlackRock, the world’s largest asset manager, in driving the current market momentum. BlackRock’s application for a Bitcoin spot exchange-traded fund (ETF) has caused a flurry of excitement in the industry. The potential approval of such an ETF could potentially be a game-changer, opening the doors for large scale institutional investments into Bitcoin, despite being months to years away from being publicly available.
Why the interest in Bitcoin specifically? One factor may be the deflationary mechanisms built into the code. Bitcoin goes through “halving cycles”, meaning the reward for mining a block on the blockchain is cut in half every few years, so that every year it takes double the computing power (and double the price) to produce the same Bitcoin. This is one way to have a token be deflationary, but it only works if it’s a proof-of-work coin. Other token projects have made their asset deflationary by having buyback mechanisms, automatic burns (sending tokens to a Null address), or increasing mint parameters.
The ETF filing doesn’t just impact Bitcoin; it reverberates throughout the entire crypto market. Other significant players, such as Invesco and WisdomTree, are also following suit and applying for Bitcoin spot ETFs, while non-Bitcoin crypto projects are gaining support, such as the institution-only exchange launched by Fidelity, Schwab, and Citadel Securities. The reason is straightforward: Financial institutions are recognizing the lucrative potential of this burgeoning asset class.
Meanwhile, Federal Reserve Chair Jerome Powell has added to this sentiment with his recent comments on Bitcoin. Acknowledging that Bitcoin, and cryptocurrencies more generally, have “staying power,” Powell’s remarks indicate an increasing acceptance of digital currencies at the highest levels of financial governance. Notably, Powell has also advocated for a “robust federal role” in overseeing stablecoins, which could help build a more secure and regulated digital currency environment.
This combination of institutional interest and regulatory acceptance appears to be breathing new life into Bitcoin, sparking a rally that has taken the price above $30k, with significant support. Interestingly, the asset manager’s ETF filing could be a key driver for this uptick. Market experts suggest that the anticipation of BlackRock’s ETF gaining approval is spurring a race to accumulate among Bitcoin investors, before these institutions begin adding it to their coffers.
Moreover, the inflow of institutional interest into the crypto market as a whole seems to be increasing demand and driving up prices. As Bitcoin becomes more accessible to a broader range of investors through vehicles such as ETFs, this demand could increase even further.
BITCOIN TECH ADVANCES; ordinals/BRC/L2s
As the crypto market continues to evolve, it’s evident that Bitcoin will remain a pivotal player. Its future looks bright as it garners more recognition as a legitimate asset class and continues to climb in value. As the market continues to mature under the watchful eye of regulators and institutions, Bitcoin and other cryptocurrencies are likely to continue playing a significant role in the future of finance.
Bitcoin, though being the ‘OG’ of cryptocurrencies, has experienced a sort of revival in development. After the Taproot upgrade to the code in late 2021, developers began finding new and interesting things they could do that were previously impossible. The upgrade was just a few changes and new cryptographic primatives, but allowed for the ‘inscribing’ of individual Sats with the Ordinals Protocol. This gave us Bitcoin NFTs aka Ordinals, and the currently experimental ‘BRC-20’ token standard. At first it may seem odd to use Bitcoin in such an unconventional way, but the benefits of Bitcoin security and liquidity joined with Ethereum-like capabilities are nothing to ignore.
Many do not realize that, in the prehistoric days of digital currencies, Satoshi Nakamoto did not invent the blockchain, nor the P2P network, nor the concept of proof-of-work; Bitcoin was the first to do those things, but in a way that increased the scarcity of the token, to balance against the minting of new coins. That’s why BitGold, eCash, Hashcash, and the rest did not survive. That was the due to the technological breakthrough, the “Revolution” of deflation in a virtual asset. This new chapter of Bitcoin and cryptocurrencies at large might just be the beginning of another financial revolution that could change the way we perceive and handle money.
