Bitcoin 
$91,967 stands out from traditional asset classes due to its unique combination of monetary, commodity, and payment network attributes. Over the past decade, Bitcoin has significantly outperformed classic assets as a store of value, providing substantial returns. Experts emphasize the need to evaluate Bitcoin differently from similar assets.
Rise of Institutional and Societal Adoption
Bitcoin’s societal and institutional adoption is becoming increasingly robust. Individual investors turn to Bitcoin to shield themselves from the diminishing purchasing power caused by persistent inflation. Meanwhile, portfolio managers are enhancing their risk-reward balance, even with minimal Bitcoin allocation. In fact, in 2024, Bitcoin outperformed the S&P 500 and leading hedge funds with an impressive 121% return. The mounting pressure on investment managers to include Bitcoin in their portfolios could pave the way for more institutional adoption in the long term.
Corporations also begin to fortify their balance sheets with Bitcoin. The Japanese company Metaplanet decided to adopt Bitcoin as a core balance sheet asset in 2024, becoming the largest corporate Bitcoin holder in Asia by the year’s end. Similarly, companies embracing Bitcoin are seen providing higher returns to their shareholders compared to their non-Bitcoin adopting counterparts. These developments intensify the pressure on companies to adopt Bitcoin.
Government Adoption and Economic Impacts
Governments’ attitudes towards Bitcoin are also evolving. El Salvador became the first country in 2021 to accept Bitcoin as legal tender, adding over 6,000 bitcoins to its reserves. This move contributed to the nation’s credit rating improvement, boosted tourism, and spurred economic growth.
anilsaidso: “Dismissing Bitcoin is not a distinctive stance. Critics may become advocates with knowledge; remaining critics signals mental stagnation.”
There is an emphasis on the potential benefits for other countries adopting Bitcoin, such as increasing international reserves, reducing borrowing risk, and strengthening economic stability.
Behavioral Dynamics Driving Bitcoin Adoption
Behavioral phenomena like network effects, the Lindy effect, and the Dunning-Kruger effect could accelerate Bitcoin adoption. Network effects suggest that as more participants join, the value and use of the Bitcoin network could rise. The Lindy effect states that the longer Bitcoin exists, the more likely it is to survive. It is noted that initial heavy criticism is indicative of the early adaptation stage; over time, criticisms may diminish as the level of understanding increases.
Research suggests that the number of Bitcoin users and its price grow following a “power law” and that its spread follows a virus-like process. If this trend persists, Bitcoin’s long-term price potential may increase while its risk/volatility could decrease over time. The diversification of different investor profiles can enhance market diversity and reduce price fluctuations.
Bitcoin’s supply dynamics significantly affect the adoption process. Halving events, occurring approximately every four years, reduce miner rewards by half, decreasing new Bitcoin supply to the market. Historically, noticeable price increases have followed each Halving. Experts argue that markets have not fully priced in this supply shock, suggesting that the price increases post-Halving are not coincidental.
Globally, it is believed that individuals hold about 52% of Bitcoin assets, while exchanges hold 15%. Although the proportion of Bitcoin owned by governments and public institutions remain low, it is projected to rise in the coming years.
Bitcoin’s absolute scarcity character is supported by a 21 million supply cap. This limited supply could exert upward pressure on the price if the demand remains constant. Historical data shows that reducing supply supports the price in the long term. Experts suggest Bitcoin might surpass traditional store-of-value assets like gold or government bonds in the future.
Bitcoin is also discussed as a hedge against inflation. There has been a correlation observed between the increase in global money supply and the Bitcoin price in recent years, with Bitcoin being more embraced in countries experiencing high inflation. Additionally, Bitcoin’s decentralized and seizure-resistant nature offers extra assurance against potential “national defaults.”
Although the importance of the market’s four-year cycle seems to be diminishing, the rapid growth of institutional demand is increasingly driving growth through demand rather than supply. As the demands of institutional investors, companies, and governments for Bitcoin rise, they may become more decisive factors, potentially creating upward price pressure. In this context, some models suggest Bitcoin could reach $1 million by 2027.
As Bitcoin becomes more widespread, risk decreases, and significant economic players start including it in their portfolios. Strengthening institutional demand and limited supply have positioned Bitcoin as a competitor to traditional value preservation tools. Despite facing high volatility, investors are expected to see long-term risk reduction and potentially higher returns compared to classic assets. Bitcoin’s evolving technological features and economic factors make it a significant contender in the global financial system.
