What is finance?

The essence of finance is the allocation of assets across space and time.

Typical cross-space deployment: lending, payment, and trading

Typical cross-time allocation: pledge, interest, options

In the past, Bitcoin was only stored in wallets, and tended to be static in time and space. More than 65% of Bitcoin has not been moved for more than a year, and "BTC should only be stored in wallets" is like a thought stamp.

Therefore, BTC was not favored for a long time. It was even pushed to the negative side by public opinion and was called a scam.

But when the Bitcoin timeline advances to 2024, Bitcoin returns to the center of the world, the Bitcoin price breaks through the $100,000 mark, and the market value exceeds $3 trillion. BTC has become a $3 trillion conspiracy, and people's innovation and discussion about BTC have quietly emerged...

I believe that Bitcoin's price fluctuations contain unique characteristics that are difficult to replicate in traditional financial markets. In the past few years, Bitcoin's performance has sometimes been highly correlated with U.S. stocks, and sometimes deviated from the traditional market track, showing the dual attributes of risk assets and safe-haven assets. Behind this complex narrative, Bitcoin is revealed to be multifaceted as an emerging asset, and it also provides unique opportunities for investors.

Bitcoin: The dual identity of risk and safe haven

For a long time, the role of Bitcoin has been constantly changing with the changes in market sentiment. When investors are confident in economic growth and market risk appetite increases, Bitcoin is often seen as a high-yield risk asset, which is similar to the trend of the S&P 500 index. However, when the global market is in panic or the traditional financial system is in turmoil, Bitcoin is often seen as a safe-haven asset, and funds are pouring into Bitcoin to avoid risks. This characteristic makes Bitcoin both an accelerator of the investment portfolio and an anchor for stable assets in market fluctuations.

Data shows that Bitcoin’s long-term correlation with the S&P 500 is just 0.17, much lower than other asset classes. However, during specific market cycles, this correlation can change significantly. For example, when FTX crashed in 2023, Bitcoin’s negative correlation with the S&P 500 reached a staggering -0.76, but quickly rose back to a positive correlation of 0.57 in the following months. This unpredictable correlation reflects the complexity of the Bitcoin market and also provides market participants with the opportunity to dynamically adjust their strategies.

According to the latest data, ETF institutions’ Bitcoin holdings account for 6.67% of the total circulation, and this proportion is expected to increase further as more institutions get involved. In particular, in recent years, the continued increase in Bitcoin holdings by traditional financial giants represented by BlackRock and MicroStrategy has not only improved market liquidity, but also further narrowed the capital flow pattern between Bitcoin and US stocks.

This institutionalization trend has far-reaching consequences. On the one hand, the participation of institutional investors has enhanced the stability of the market, making Bitcoin's performance more consistent with traditional financial markets; on the other hand, it has also made Bitcoin more susceptible to macroeconomic events and policy adjustments. Especially in the context of US policy changes, the investment decisions of institutional investors will become an important driving factor in Bitcoin price fluctuations.

Potential impact of the Trump administration

In 2025, the US policy environment may have a profound impact on the Bitcoin market. The return of the Trump administration and potential crypto-friendly policies, such as the appointment of Paul Atkins as SEC Chairman, may inject strong momentum into the Bitcoin market. If the regulatory environment is further relaxed, Bitcoin-related financial products (such as ETFs) may usher in a peak in approval. This will not only improve market transparency, but also open the door to more institutional investors.

However, this "Americanization" process also makes Bitcoin's price trend more susceptible to the sentiment of the U.S. stock market. When the U.S. economy is growing strongly, Bitcoin may behave as a high-yield risk asset; and when the traditional financial system encounters a crisis, Bitcoin may show its unique safe-haven value. This dual attribute will be more obvious in the future market.

Bitcoin’s future role: a faster “safe haven” asset

In comparison with traditional assets, Bitcoin shows unique advantages. For example, compared with the S&P 500 or U.S. Treasuries, Bitcoin has a long-term return rate far exceeding that of traditional assets despite its higher volatility. This "faster risk aversion" feature makes it an important addition to a portfolio. It is worth noting that the correlation between the S&P 500 and U.S. Treasuries in 2024 is approaching 1.0. This means that these two asset classes may fall or rise at the same time in the same time period, weakening investors' ability to diversify risks. In this context, the uniqueness of Bitcoin is particularly important. Its relatively independent price volatility characteristics provide investors with a means of hedging, especially when traditional markets are moving in the same direction.

As a unique asset class, Bitcoin's market performance is affected by a variety of factors, including macroeconomic events, institutional investor behavior, and changes in the policy environment. The role switch from a risky asset to a safe-haven asset makes it stand out in a complex market environment.

Of course, any investment has risks, especially in the crypto market, where large fluctuations often make investors walk on thin ice and lose sleep at night, but any market also has its own rules. If you are stuck in a short position or are not sure about the future trend, you can also comment "666" to Chaodada to discuss the future trend together.

I believe that as the global cryptocurrency market continues to mature and more policy support arrives, Bitcoin will gradually establish itself as an indispensable part of the global financial market. In this process, Bitcoin will not only become an important part of the investment portfolio, but may also become a true digital gold, providing investors with stable and strong value support.

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