Matt Hougan, Chief Investment Officer at Bitwise Asset Management, Inc. argues Bitcoin‘s (CRYPTO: BTC) price is driven by both speculation and real-world use — and that’s to be expected for an asset in its early stages of development.
What Happened: “Bitcoin’s price is driven by both speculation and utility, and that’s exactly what you’d expect for an asset in its early stages of development,” he stated in a Twitter thread Wednesday.
Hougan takes us on a thought journey. Imagine Bitcoin back in 2009, its infancy. “It had very little value (less than $1 million), there were no public exchanges, and it was highly volatile,” Hougan describes.
“There was no easy way to store it and nowhere to spend it.”
Owning Bitcoin back then was essentially a speculative bet on its future potential.
Now, let’s jump to a hypothetical 2050.
Bitcoin, in this scenario, has become a global powerhouse, widely accepted as a currency and a cornerstone of international trade.
Hougan suggests, “At this point, very few people are using bitcoin for speculation, because there is little appreciation potential left.”
Bitcoin’s usefulness would be the primary driver of its value.
The key takeaway, according to Hougan, is that Bitcoin’s utility is undeniably increasing.
“As it becomes more established, the ratio of speculation to utility will naturally adjust,” he argues.
This shift wouldn’t be an overnight transformation, but rather a gradual evolution.
Skeptics often point to Bitcoin’s volatility and regulatory uncertainties as red flags. However, Hougan flips the script, suggesting these are the very aspects that speculators are banking on.
“Speculators believe the asset will continue to improve on these metrics and tap into more utility,” he explains.
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Why It Matters: Real-world examples back up Hougan’s claims. He cites a financial advisor who now incorporates Bitcoin into his strategy for high-net-worth clients.
“He explained that, for these clients, the only material risk to their long-term wealth is a shock devaluation of the dollar,” Hougan highlights.
This advisor views Bitcoin as a hedge against such a scenario, a strategy that wouldn’t have been considered viable just a few years ago.
The recent launch of Bitcoin ETFs has significantly increased its legitimacy in the eyes of such investors.
Bitcoin’s growing adoption in economies grappling with inflation or currency controls further demonstrates its evolving utility.
In these regions, Bitcoin becomes a tool for wealth preservation and navigating economic instability.
“The right question to ask is not whether there is speculation in Bitcoin,” Hougan concludes.
“Of course there is; it’s early. Instead, the right question is: Is real-world use increasing over time? It’s hard to look at the progress we’ve seen over recently and say anything but yes.”
Bitcoin’s current market capitalization, though substantial at $1.3 trillion, still pales in comparison to established assets like gold and major currencies.
This suggests there’s significant room for growth.
As Bitcoin’s utility expands, so too will its role in shaping the global financial landscape.
What’s Next: For a deeper dive into the future of digital assets, including Bitcoin, consider attending the Benzinga Future of Digital Assets conference on Nov. 19, where Hougan is scheduled to speak.
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