Value and Scarcity

Yesterday, the value of bitcoin against the £UK, exceeded £50,000. There was clearly a lot of excitement about this in the markets. But, underlying this massive increase in value was a story of currency movements, and a fundamental geopolitical change. 

Because, consider this. According to Vivek of Bitgrow Lab (a PR agency dedicated to bitcoin startups) the “fiat value” of bitcoin overtook that of the UK pound yesterday.. Now, I’m not exactly sure how Vivek calculated this. From his table it’s not immediately clear how he calculated value. For example, if he’s using money supply (M1) as the metric he seems to have understated Sterling valuation. 

But, in some respects, it doesn’t really matter. Because the point Vivek is making is a valid one. People are moving out of fiat and into bitcoin - massively driving up the value of bitcoin at the expense of fiat. And, therein lies the fundamental geopolitical change. Because bitcoin is now becoming more important than several fiat currencies. It’s only a matter of time before it’s more important than all of them. 

The increase in price reflects the fact that the HODL (hold on for dear life) rule applies for many bitcoin holders. Newly approved ETFs are desperate to buy, but there’s a lack of sellers - hence the price increase. And as the price increases the likelihood is that there will be an even greater scramble - especially among institutional investors - to get out of fiat-denominated positions (especially equities).  And, on the bond markets, rates are likely to have to increase to challenge bitcoin’s increasing presence in the overall asset market. The scramble for positions may set in motion a vast exodus out of fiat and government bonds. 

I don’t think I’m overstating this. Clearly the bitcoin market was languishing for many years. The last bull market was back in 2021. Vast money-printing to sustain the lockdown folly is only really shaking through the system now - especially with the halving event imminent (in April) and the recent (somewhat astonishing) approval of spot bitcoin ETFs.  But the fact remains that bitcoin, at around $1.2trillion market capitalisation, is now greater than the value of many sovereign currencies - including the currencies routinely traded on the international bond markets. 

The risk facing every asset manager - and, frankly, every adult - is not holding bitcoin. The tectonic plates are shifting before our eyes, in real time. The financial markets will never be the same again. 

When bitcoin was spiking 2 weeks ago (at around $50,000) I was interviewed by David Kurten (clip above in this piece) on TNT Radio and touched on how money was moving towards value and away from debt-ridden nations and towards commodity-rich nations (like Russia) and to bitcoin.  This proved prescient. Yesterday bitcoin reached highs of over $60,000.  Value and scarcity are in play again.