Author: @Web3_Mario
Summary: First, I apologize for the delay in updates last week. After briefly studying AI agents like Clanker, I found it very interesting and spent some time developing some frame tools. After assessing the development and potential cold start costs, rapidly pursuing market hotspots seems to be the norm for most small and medium-sized entrepreneurs in the Web3 industry, and I hope everyone understands and continues to support. Back to the point, this week I hope to discuss a viewpoint I have been pondering lately. Of course, I think this can also explain the recent market volatility. After BTC's price broke the new high, how to continue capturing incremental value is key, and my view is that we need to observe whether BTC can take over from AI, becoming the core driving force for economic growth in the new political and economic cycle under Trump's administration. This game has already unfolded alongside MicroStrategy's wealth effect, but the entire process will inevitably face numerous challenges.
With the unfolding wealth effect of MicroStrategy, the market has begun to speculate whether more listed companies will choose to allocate BTC for growth.
We know that the crypto market experienced significant volatility last week, with BTC prices fluctuating widely between $94,000 and $101,000. There are two core reasons for this, and I will briefly outline them here.
First, we need to trace back to December 10, when Microsoft officially rejected the (Bitcoin Financial Proposal) proposed by the National Center for Public Policy Research at the annual shareholders' meeting. In the proposal, this think tank suggested that Microsoft diversify 1% of its total assets into Bitcoin as a potential hedge against inflation. Before this, MicroStrategy's founder Saylor publicly declared for three minutes online as the FEP representative of NCPPR through X, leading the market to hold some hope for the proposal, although the board had already clearly recommended rejecting it beforehand.
Here, let’s elaborate a bit on the so-called National Center for Public Policy Research. We know that think tanks are composed of industry experts, generally funded by governments, political parties, or commercial companies. Most think tanks are non-profit organizations, not official institutions; this operational model allows them to be tax-exempt in countries like the US and Canada. Typically, the viewpoints disseminated by think tanks are expected to serve the interests of their sponsors. NCPPR, founded in 1982 and headquartered in Washington, D.C., holds a certain status among conservative think tanks, especially in supporting free markets, opposing excessive government intervention, and promoting corporate responsibility issues, though its overall influence is relatively limited compared to larger think tanks like the Heritage Foundation or the Cato Institute.
The think tank has faced criticism for its positions on issues such as climate change and corporate social responsibility, particularly due to its alleged funding sources associated with the fossil fuel industry, which has limited NCPPR's influence in policy advocacy. Progressive figures often label it as a 'mouthpiece for interest groups,' undermining its impact across the broader political spectrum. In recent years, NCPPR has initiated the FEP (Free Enterprise Project) and frequently proposed resolutions at the shareholders' meetings of major companies, questioning large corporations' policies on right-wing issues such as racial diversity, gender equality, and social justice. For example, they submitted proposals against mandatory racial and gender quotas for companies like JPMorgan Chase, arguing that such policies lead to 'reverse discrimination' and harm corporate performance. For companies like Disney and Amazon, they question the corporations' excessive catering to progressive issues, advocating that businesses should focus on profitability rather than 'pleasing minority groups.' With Trump's presidency and his supportive stance on cryptocurrency policies, the organization quickly promoted Bitcoin adoption to various public companies through FEP, including giants like Amazon aside from Microsoft.
With the official rejection of this proposal, BTC's price briefly dropped to $94,000 but quickly rebounded. The extent of the price volatility shows that the current market is indeed in a state of anxiety, and the point of anxiety lies in what the new source of growth will be after BTC's market capitalization broke the historical high. From recent signs, we see that some key leaders in the crypto world are choosing to leverage MicroStrategy's wealth effect to promote the financial strategy of allocating BTC on the balance sheets of more listed companies to combat inflation and achieve performance growth, thereby gaining greater adoption for BTC. Now, let's look ahead to whether this strategy can succeed.
BTC, as a substitute for gold, faces a long road ahead to become a globally recognized store of value, and success in the short term is not easy.
First, let's analyze the first appeal of this strategy: whether using BTC to combat inflation is valid in the short term. Typically, when discussing inflation hedges, gold is the first thing that comes to mind, and during Powell's Q&A session at the beginning of the month, he also mentioned Bitcoin as a competitor to gold. So, can Bitcoin serve as a substitute for gold and become a broadly recognized store of value globally?
This issue has always been a focal point in discussions about Bitcoin's value. Many have made numerous arguments regarding the similarities in the intrinsic properties of assets, which I won't delve into here. However, I want to point out how long it will take to realize this vision or whether this vision can support BTC's current valuation; my answer is that it is unlikely to be achieved in the foreseeable four years or in the short to medium term. Therefore, using this as a short-term promotional strategy lacks appeal.
We reference how gold has developed into its current status as a store of value. As a precious metal, gold has always been regarded as a valuable item by various civilizations, holding universal significance. The core reasons for this include the following points:
Its obvious luster and excellent ductility give it significant value as an important decorative item.
The limited output has granted gold scarcity, thus endowing it with financial attributes, making it easy to be chosen as a class symbol in societies that have undergone class divisions.
Gold's widespread distribution and relatively low mining difficulty allow various civilizations to be unaffected by cultural or productivity development factors, enabling a grassroots, broader dissemination of value culture.
The universal value formed by these three attributes has allowed gold to play the role of currency in human civilization, and the entire development process has ensured that gold’s intrinsic value remains stable. Thus, we see that even when sovereign currencies abandon the gold standard and modern financial instruments endow them with more financial attributes, gold's price generally follows a long-term growth trend, effectively reflecting the real purchasing power of currency.
However, it is unrealistic for Bitcoin to replace gold in the short term. The core reason lies in its value proposition as a cultural perspective; its spread in the short to medium term will undoubtedly shrink rather than expand, for two reasons:
The value proposition of Bitcoin is top-down: as a virtual electronic commodity, Bitcoin mining relies on computational power competition, where two determining factors are electricity and computing efficiency. Firstly, electricity costs reflect a nation's level of industrialization, while the cleanliness of the energy behind that electricity determines future development potential. Computing efficiency relies on chip technology. Directly speaking, obtaining BTC is no longer something that can be achieved solely through personal PCs; with technological advancements, mining will inevitably concentrate in a few regions, making it hard for undeveloped countries, which do not have a competitive advantage and represent a significant portion of the global population, to access it. This adversely affects the efficiency of spreading this value proposition, as when you cannot control a certain resource, you can only become its exploited object. This is why stablecoins compete with the sovereign currencies of some unstable exchange rate countries; from the perspective of national and ethnic interests, this is naturally unrecognized. Hence, it is hard to see undeveloped countries encouraging this value proposition.
The regression of globalization and the challenge to dollar hegemony: we know that with Trump's return, his promotion of isolationism will significantly impact globalization, directly affecting the dollar's influence as the global trade currency. This has posed a certain challenge to its hegemonic status, a trend referred to as 'de-dollarization.' This entire process will hit the dollar's demand worldwide in the short term, while Bitcoin, primarily priced in dollars, will inevitably increase its acquisition costs, thereby raising the difficulty of promoting its value proposition.
Of course, the above two points only discuss the challenges of this trend's development in the short to medium term from a macro perspective; they do not affect Bitcoin's narrative as a substitute for gold in the long term. In the short to medium term, the most direct impact of these two points is reflected in its high price volatility because the rapid increase in its value in the short term is primarily based on the enhancement of speculative value, rather than an increase in the influence of its value proposition. Therefore, its price volatility will inevitably align more with speculative assets, exhibiting high volatility characteristics. However, due to its scarcity features, if the dollar continues to be severely overissued and the intrinsic purchasing power of the dollar declines, all dollar-denominated assets could be considered relatively inflation-resistant, similar to the luxury goods market in past years. However, this inflation resistance is not sufficient to give Bitcoin a stronger competitive edge over gold regarding value storage.
Therefore, I believe that positioning inflation resistance as the focal point of short-term marketing is not sufficient to attract 'professional' clients to choose Bitcoin over gold, as their balance sheets would face extremely high volatility, which cannot be changed in the short term. Thus, it is highly likely that we will see major publicly traded companies with stable business development not aggressively choosing to allocate Bitcoin to cope with inflation in the upcoming period.
BTC taking over from AI, becoming the core driving force for economic growth in the new political and economic cycle under Trump's administration.
Next, let's discuss the second point: whether some growth-stagnant listed companies can achieve overall revenue growth and boost their market value through BTC allocation. I believe this financial strategy can receive broader recognition, which is the core for judging whether BTC can gain new value growth in the short to medium term. Moreover, I think this is relatively easy to achieve in the short term, during which BTC will take over from AI, becoming the core driving force for economic growth in the new political and economic cycle under Trump's administration.
In previous analyses, we have clearly discussed the successful strategy of MicroStrategy, which is to convert the appreciation of BTC into revenue growth for the company, thereby boosting its market value. This indeed has strong appeal for some growth-stagnant companies, as embracing a trend is more comfortable than burning oneself to carve out a career. You can see many dwindling companies that are experiencing a rapid decline in their main business revenue, ultimately opting to use this strategy to allocate their remaining value to preserve some opportunities.
With Trump's return, his internal government reduction policies will significantly impact the structure of the US economy. Let's look at a piece of data: Warren Buffett's indicator for US stocks. The so-called Buffett indicator, mentioned by the stock guru Buffett in a special article in Forbes magazine in December 2001, refers to the ratio of total stock market capitalization to GDP, which can serve as a gauge for whether the overall stock market is overvalued or undervalued, thus being commonly referred to as the Buffett indicator. This metric can assess whether the current financial market reasonably reflects the fundamentals, with Buffett's theoretical index indicating that a range of 75% to 90% is reasonable, and exceeding 120% suggests the stock market is overvalued.
We can see that the current Buffett indicator for US stocks has already exceeded 200%, indicating that the US stock market is in an extremely overvalued state. In the past two years, the core driving force to prevent the US stock market from adjusting due to tightened monetary policy has been the AI sector, represented by NVIDIA. However, with NVIDIA's third-quarter financial report showing a slowdown in revenue growth and its earnings guidance indicating a further slowdown next quarter, the growth deceleration is evidently insufficient to support such a high price-to-earnings ratio. Therefore, there is no doubt that the US stock market will face significant pressure in the coming period.
For Trump, the specific impact of his economic policies in the current environment is undoubtedly filled with uncertainty. For instance, whether the tariff war will trigger domestic inflation, whether cuts in government spending will affect domestic corporate profits, and the rising unemployment issue, as well as whether lowering corporate income tax will exacerbate the already severe fiscal deficit problem. Furthermore, Trump seems more determined to rebuild America’s internal ethics and morals, and the impacts from advancing sensitive cultural issues, such as strikes, protests, and labor shortages from reduced illegal immigration, could cast a shadow over economic development.
If economic issues arise, particularly a stock market crash in the currently highly financialized US, this will severely impact his approval ratings and, in turn, the effectiveness of his internal reforms. Thus, implanting a core driving force for economic growth that he can control into the US stock market becomes highly advantageous, and I believe Bitcoin is very suitable for this role.
We know that the recent 'Trump trade' in the crypto world has fully demonstrated his influence on the industry, and Trump's support mostly goes to traditional domestic industries rather than technology companies, meaning their businesses did not directly benefit from the last cycle's AI wave. However, if we follow the described developments, the situation will change. Imagine if domestic small and medium-sized enterprises in the US begin choosing to allocate a certain amount of Bitcoin reserves on their balance sheets; even if their main business is affected by some external factors, Trump could stabilize the stock market prices to some extent merely by promoting some crypto-friendly policies. Furthermore, this directed stimulus is highly efficient and can even bypass the Federal Reserve's monetary policy, making it less likely to be constrained by the establishment. Thus, in the upcoming new political and economic cycle in the US, this strategy would be a good choice for Trump's team and many small and medium-sized US enterprises, and its development process is worth watching.