Author: @Web3_Mario
Summary: First, I would like to apologize for the delayed updates last week. After briefly studying Clanker and other AI agents, I found them very interesting and spent some time developing some small frame tools. After evaluating the development and potential cold start costs, quickly chasing market trends is likely a norm for most small and medium-sized entrepreneurs in the Web3 industry, and I hope everyone understands and continues to support. Back on track, this week I hope to discuss a point I have been thinking about recently, which could also explain the recent market volatility: after BTC's price broke new highs, how to continue capturing incremental value. My viewpoint is that we should focus on whether BTC can take over from AI and become the core driver of economic growth in the new economic cycle under Trump's administration. This game has already begun with the wealth effect of MicroStrategy, but the whole 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 to achieve growth.
We know that the crypto market experienced significant fluctuations last week, with BTC prices fluctuating widely between $94,000 and $101,000. There are two core reasons for this, which I will briefly summarize here.
First, we must trace back to December 10, when Microsoft formally rejected the (Bitcoin financial proposal) put forward by the National Center for Public Policy Research during its annual shareholder meeting. In the proposal, this think tank suggested that Microsoft allocate 1% of its total assets to Bitcoin as a potential means to hedge against inflation. Prior to this, MicroStrategy's founder Saylor also publicly stated via X as a representative of NCPPR's FEP, giving a three-minute online presentation, so the market had certain hopes for this proposal, even though the board had already explicitly recommended rejecting it beforehand.
Here, let’s take a moment to elaborate on the so-called National Center for Public Policy Research (NCPPR) in the U.S. We know that think tanks are composed of industry experts, generally funded by governments, political parties, or businesses. Most think tanks are non-profit organizations and are not official agencies, allowing them to be tax-exempt in countries like the U.S. and Canada. Usually, the viewpoints expressed by think tanks need to serve the interests of their sponsors. Founded in 1982 and headquartered in Washington, D.C., the NCPPR holds a certain position among conservative think tanks, especially in supporting free markets, opposing excessive government intervention, and promoting corporate responsibility issues, but its overall influence is relatively limited compared to some larger think tanks (like the Heritage Foundation or the Cato Institute).
This think tank has faced criticism for its stance on issues such as climate change and corporate social responsibility, especially due to its suspected ties to funding sources connected to the fossil fuel industry, which has restricted NCPPR's advocacy in policy-making. Progressive individuals often label it as a 'voice for interest groups,' undermining its influence across a broader political spectrum. In recent years, NCPPR has initiated the FEP (Free Enterprise Project), frequently proposing at shareholder meetings of various listed companies to question the policies of large corporations on right-wing issues such as racial diversity, gender equality, and social justice. For instance, they submitted proposals against mandatory racial and gender quotas targeting companies like JPMorgan, arguing that these policies lead to 'reverse discrimination' and harm corporate performance. Regarding companies like Disney and Amazon, they questioned the companies' excessive alignment with progressive issues, asserting that companies should focus on profitability rather than 'pleasing minority groups.' With Trump's presidency and his supportive stance towards cryptocurrency policies, the organization promptly promoted Bitcoin adoption through FEP to major listed companies, including giants like Amazon aside from Microsoft.
Following the official rejection of the proposal, BTC's price briefly dropped to $94,000 but quickly rebounded. From the extent of the price fluctuations caused by this incident, we can easily observe that the current market is indeed in a state of anxiety, with the anxious point being what the new sources of growth will be for BTC's market capitalization after it broke past its historical highs. Recent signs indicate that some key leaders in the crypto world are choosing to leverage the wealth effect of MicroStrategy to promote the financial strategy of allocating BTC on the balance sheets of more listed companies to combat inflation and achieve performance growth, thereby increasing BTC's adoption. So next, let's look ahead to whether this strategy can succeed.
BTC, as an alternative to gold, has a long way to go to become a broadly recognized global value store; success in the short term is not easy.
Let’s first analyze the first attractive aspect of this strategy: whether the efficacy of allocating BTC to combat inflation is valid in the short term. Typically, when we think of combating inflation, we first consider gold. Additionally, during Powell's press conference earlier this month, he also mentioned that Bitcoin is a competitor to gold. So, can Bitcoin become an alternative to gold and serve as a broadly recognized global value store?
This issue has always been a focal point in discussions about Bitcoin's value. Many people have conducted numerous arguments based on the similarities in the inherent properties of assets, which I will not elaborate on here. What I want to point out is how long it will take to realize this vision, or whether this vision supports BTC's current valuation; my answer is that it is not easy to achieve within the foreseeable four years, or in short to medium term, thus making it less attractive as a short-term promotional strategy.
We refer to how gold, as a value storage medium, has developed to its current status. As a precious metal, gold has always been regarded as a valuable item by various civilizations, possessing universal significance. The core reasons are as follows:
The obvious luster and excellent ductility give it significant value as an important decorative item.
The relatively low output value of gold brings about scarcity, thus attributing financial properties to it, making it easily chosen as a class symbol in societies where class divisions emerge.
The widespread distribution of gold globally and its relatively low mining difficulty allow various civilizations to be unrestrained by factors like culture and productivity development, thus making the dissemination of value culture more bottom-up and broadening its reach.
The universal value formed by these three attributes allows gold to play the role of currency in human civilization, and the entire development process has made gold's inherent value stable. Thus, we see that even when sovereign currencies abandon the gold standard, and modern financial instruments give them more financial attributes, the price of gold has generally followed a long-term growth pattern, reflecting the real purchasing power of currency quite well.
However, it is unrealistic for Bitcoin to replace gold's status in the short term. The core reason lies in its value proposition as a cultural viewpoint, which is bound to contract rather than expand in the short to medium term for two reasons:
Bitcoin's value proposition is top-down: as a virtual electronic commodity, Bitcoin's mining relies on computational power competition. There are two determining factors here: electricity and computational efficiency. First, the cost of electricity reflects a country's level of industrialization, and the degree of cleanliness of the energy behind electricity determines future development potential. Computational efficiency relies on chip technology. To put it directly, acquiring BTC is no longer something that can be achieved purely with a personal PC; with technological advancements, its distribution is bound to concentrate in a few regions, and countries with a major population distribution that lack competitive advantages will find it difficult to acquire it. This adversely affects the efficiency of disseminating this value proposition because when you cannot control a certain resource, you can only become its exploited subject. This is why stablecoins compete with some unstable currencies in underdeveloped countries, and from the perspective of national and ethnic interests, this naturally cannot gain recognition; thus, it is challenging 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 isolationist policies will significantly impact globalization, and the most direct effect will be on the influence of the dollar as a global trade settlement currency. This has led to a certain challenge to its dollar hegemony, a trend referred to as 'de-dollarization.' The entire process will reduce the demand for the dollar globally in the short term, while Bitcoin, as a currency primarily priced in dollars, will inevitably raise its acquisition cost during this process, thus increasing 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 impact the narrative of Bitcoin as an alternative to gold in the long run. The most direct impact of these two points in the short to medium term is reflected in its high price volatility, as the rapid increase in its value in the short term is primarily built on speculative value enhancement rather than the growing influence of its value proposition. Therefore, its price volatility is necessarily more in line with speculative commodities, exhibiting high volatility characteristics. However, due to its scarcity, if the dollar continues to be overissued, along with the decline in the inherent purchasing power of the dollar, all dollar-denominated goods can be said to possess a certain degree of anti-inflationary quality, much like the luxury goods market in previous years. However, this anti-inflationary quality is not sufficient to give Bitcoin a stronger competitive edge in terms of value preservation compared to gold.
Thus, I believe that using anti-inflation as a short-term promotional focus is not enough to attract 'professional' clients to choose to allocate Bitcoin instead of gold, as their balance sheets will face extremely high volatility, which cannot be altered in the short term. Therefore, it is highly likely that for large listed companies with stable business development, they will not aggressively choose to allocate Bitcoin to combat inflation in the coming period.
BTC takes over AI and becomes the core driving force for economic growth in the new economic cycle that the U.S. faces under Trump's administration.
Next, we will discuss the second point: whether some struggling listed companies can achieve overall revenue growth through BTC allocation, thereby driving their market capitalization higher. I believe this financial strategy's broader acceptance is the core factor in judging whether BTC can achieve new value growth in the short to medium term, and I think this is easily achievable in the short term. In this process, BTC will take over from AI and become the core driver of economic growth in the new economic cycle under Trump's administration.
In previous analyses, we have clearly analyzed the successful strategy of MicroStrategy, which is to convert BTC appreciation into revenue growth for the company, thereby boosting the company's market value. This indeed holds strong appeal for some struggling companies; after all, embracing a trend passively is far more comfortable than burning oneself out to build a business. You can see several declining companies whose main business revenues are rapidly falling, ultimately opting to allocate the remaining value using this strategy to preserve some opportunities.
With Trump's return, internal cutback policies will significantly impact the U.S. economic structure. Let's look at a piece of data: the Buffett Indicator for U.S. stocks. The so-called Buffett Indicator, mentioned by investment guru Buffett in a December 2001 article in Forbes magazine, refers to the ratio of the total market capitalization of stocks to GDP, which can serve as a measure of whether the overall stock market is overvalued or undervalued. It is commonly known as the Buffett Indicator. This indicator can measure whether the current financial market reasonably reflects the fundamentals, with Buffett's theoretical range indicating 75% to 90% as a reasonable area, and exceeding 120% suggesting overvaluation.
We can see that the current Buffett Indicator for U.S. stocks has exceeded 200%, indicating that the U.S. stock market is in a state of extreme overvaluation. Over the past two years, the core driving force preventing the U.S. stock market from experiencing a pullback due to tightening monetary policy has been the AI sector, represented by Nvidia. However, with Nvidia's third-quarter earnings report showing a slowdown in revenue growth and its guidance indicating that revenue will further slow in the next quarter, this growth slowdown is evidently insufficient to support such a high price-to-earnings ratio. Therefore, it is undeniable that the U.S. stock market will face significant pressure in the near future.
For Trump, the specific impacts of his economic policies are undoubtedly filled with uncertainties in the current environment, such as whether the tariff war will trigger internal inflation, whether cuts in government spending will affect domestic corporate profits, and whether it will lead to rising unemployment rates, along with issues like whether lowering corporate income tax will further exacerbate the already severe fiscal deficit. Additionally, Trump seems more determined to rebuild American internal ethics and morality, but the impacts from advancing sensitive cultural issues—such as strikes, protests, and labor shortages caused by reduced illegal immigration—may cast a shadow over economic development.
If economic issues arise, particularly a stock market crash in the currently highly financialized U.S., it will severely impact its support rate and subsequently affect the effectiveness of internal reforms. Thus, implanting a core that drives economic growth and is already under control into the U.S. stock market becomes highly advantageous, and I believe that Bitcoin is very suitable for this role.
We know that the recent 'Trump trade' in the crypto world has fully demonstrated his influence in the industry, and most companies supported by Trump are traditional domestic industries rather than tech companies, meaning their businesses did not directly benefit from the AI wave in the previous cycle. However, if the situation develops as we described, it will be different; imagine if domestic small and medium-sized enterprises in the U.S. choose to allocate a certain amount of Bitcoin reserves on their balance sheets, even if their main businesses are affected by some external factors, Trump could stabilize the stock market to some extent simply by promoting some crypto-friendly policies to drive prices. This targeted stimulus is highly efficient, even capable of circumventing the Fed's monetary policy, making it less likely to be constrained by the establishment. Therefore, in the upcoming new U.S. economic cycle, this strategy could be a good choice for Trump's team and many American small and medium enterprises, and its development process is worth paying attention to.
