Research Summary
The report discusses the fundamental differences between stablecoins and Bitcoin, and how stablecoins could potentially serve as a gateway to Bitcoin adoption. It highlights the unique properties of Bitcoin and how it competes with other forms of money, including US Dollars and stablecoins. The report also speculates on the potential impact of stablecoins on Bitcoin adoption.
Key Takeaways
Bitcoin and Stablecoins: Fundamental Differences
- Unique Properties of Bitcoin: Unlike stablecoins, Bitcoin is not a cryptographic representation of an existing asset held elsewhere. It is a fully digital asset with its own settlement system. Bitcoin’s value is determined by the system’s rules (the protocol) enforced by users running its software (the network).
- Stablecoins and US Dollars: While stablecoins can overcome some limitations of US Dollars in private banking networks, their value still heavily relies on the decisions of the US Federal Reserve and Treasury. Over the long term, the value of stablecoins, by mandate, will only go down.
Bitcoin’s Competition with US Dollars
- Bitcoin’s Ability to Compete: The fundamental investment case for Bitcoin boils down to its ability to compete with other forms of money, including US Dollars. The potential impact of the stablecoin gateway will depend on Bitcoin’s ability to compete with US Dollars, in addition to the general market size of stablecoins.
Stablecoins as a Gateway to Bitcoin Adoption
- Lowering Barriers: The report speculates that a stablecoin experience lowers the barriers of both discovering and accessing Bitcoin, as well as reduces its material learning curve. This could potentially expedite the spread of crypto knowledge and lead to greater Bitcoin adoption.
- Bitcoin Adoption: The report estimates that approximately 270 million people own Bitcoin today, with over 70% living in Emerging and Frontier market countries. It anticipates that over the next decade, Bitcoin’s largest adoption will continue in similar jurisdictions.
Bitcoin’s Opportunity
- Monetary Stability: As the global population is skewed to regions where monetary stability is often lacking, Bitcoin’s opportunity is objectively large, yet also uncertain and unpredictable. The report is encouraged by the possibility of stablecoins being the entry point that expedites the spread of crypto knowledge in these regions.
Actionable Insights
- Explore the Potential of Stablecoins: Given the potential of stablecoins to serve as a gateway to Bitcoin adoption, it may be beneficial to explore the dynamics of stablecoins and their impact on the crypto market.
- Monitor Bitcoin’s Competition with US Dollars: As Bitcoin’s ability to compete with US Dollars is a key factor in its investment case, it would be prudent to monitor this competition closely.
- Understand the Role of Emerging and Frontier Markets: With a significant portion of Bitcoin owners residing in Emerging and Frontier market countries, understanding the role these markets play in Bitcoin adoption could provide valuable insights.
