Research Summary
The report discusses the increasing adoption of Bitcoin as a global monetary asset, particularly in countries with poorly managed national fiat currencies. It highlights the deteriorating relational properties of fiat currencies and the improving relational properties of Bitcoin, making it increasingly competitive in the global monetary market.
Key Takeaways
Bitcoin’s Increasing Adoption
- Bitcoin’s Popularity: The report suggests that Bitcoin is increasingly outcompeting other monetary assets in the global markets. This is particularly evident in countries with poorly managed national fiat currencies, where Bitcoin adoption rates are highest.
Relational Properties of Bitcoin and Fiat Currencies
- Fixed and Relational Properties: The report distinguishes between fixed properties of Bitcoin (like its supply schedule and ability to be self-custodied) and relational properties (like its volatility and liquidity). While the fixed properties are determined by the protocol design and cannot easily change, the relational properties are determined by usage and can improve or deteriorate.
- Deteriorating Fiat Currencies: The report observes a trend of deterioration in the relational properties of fiat currencies that compete with Bitcoin. This is particularly evident in countries with high Bitcoin adoption rates, where the principal fiat competitor is poorly managed.
Bitcoin’s Improving Relational Properties
- Improving Liquidity and Acceptance: Over time, Bitcoin’s relational properties, such as liquidity and acceptance, are improving. For instance, Bitcoin’s liquidity is already stronger than most fiat currencies, and its volatility is tempering over time.
Bitcoin’s Increasing Competitiveness
- Competing in Monetary Markets: The report concludes that Bitcoin is becoming increasingly competitive in the global monetary market. As Bitcoin’s relational properties improve and those of its competitors deteriorate, Bitcoin is expected to continue gaining ground and extracting monetary premium from competing currencies.
Actionable Insights
- Monitor Bitcoin’s Relational Properties: Given the improving relational properties of Bitcoin, it may be beneficial to monitor these properties, such as liquidity and volatility, to understand Bitcoin’s competitiveness in the global monetary market.
- Assess the Health of Fiat Currencies: The report suggests that the health of fiat currencies, particularly in countries with high Bitcoin adoption rates, is deteriorating. Therefore, it may be useful to assess the health of these currencies to understand the potential for Bitcoin adoption.
- Consider the Impact of Monetary Policies: The report highlights that the volatility of a fiat currency can improve or deteriorate based on the monetary policy choices of its supporting central bank. Therefore, it may be beneficial to consider the impact of these policies on the competitiveness of Bitcoin and other cryptocurrencies.
