Author: @Web3_Mario
Abstract: First, the author would like to apologize for the delay in the previous week. After a simple study of Clanker and other AI Agents, the author found it very interesting and spent some time developing some frame tools. After evaluating the development and potential cold start costs clearly, quickly chasing market hotspots may be the norm for most small and medium-sized startups in the Web3 industry, and the author also hopes that everyone will understand and continue to support. To the point, this week the author hopes to discuss a point that he has been thinking about recently, which can also explain the recent violent market fluctuations. That is, after the BTC price breaks a new high, how to continue to capture incremental value. The author's view is that the focus should be on observing whether BTC can take over AI and become the core driver of economic growth in the new political and economic cycle that the United States ushered in under the Trump administration. The game around this has already begun with the wealth effect of MicroStrategy, but the whole process will still face many challenges.
As the wealth effect of MicroStrategy unfolds, the market has begun to speculate whether more listed companies will choose to configure BTC to achieve growth
We know that the crypto market has experienced violent fluctuations last week, with the BTC price fluctuating widely between $94,000-$101,000. There are two core reasons, which I will briefly go through for you.
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 (NCPPR) at its annual shareholder meeting. In the proposal, the think tank suggested that Microsoft diversify 1% of its total assets into Bitcoin as a potential hedge against inflation. Prior to this, MicroStrategy's founder Saylor had also publicly announced as the FEP representative of NCPPR and gave a 3-minute online presentation, so the market had some hope for the attitude towards this proposal, although the board had already clearly recommended rejecting it before.
Let me briefly expand on this so-called National Center for Public Policy Research. We know that think tanks are composed of industry experts and are usually funded by governments, political parties or business companies. Most think tanks are non-profit organizations and are not official institutions. This mode of operation can be tax-exempt in countries like the United States and Canada. Usually, the opinions output by think tanks need to serve the relevant interests of the sponsors behind them. NCPPR, founded in 1982 and headquartered in Washington, D.C., has a certain influence in the conservative think tank community, especially in supporting free markets, opposing government over-intervention, and promoting corporate responsibility issues, but its overall influence is relatively limited compared to some larger think tanks (such as the Heritage Foundation or the Cato Institute).
The think tank has been criticized for its positions on issues such as climate change and corporate social responsibility, especially its alleged financial ties to the fossil fuel industry, which has somewhat limited its influence in policy advocacy. Progressive people often accuse it of being a "mouthpiece for special interests", which has weakened its influence across the broader political spectrum. In recent years, NCPPR has launched the FEP (Free Enterprise Project) program and frequently submitted proposals at shareholder meetings of various listed companies, questioning the policies of large companies on issues such as racial diversity, gender equality and social justice from a right-wing perspective. For example, against companies like JPMorgan Chase, they submitted proposals opposing mandatory racial and gender quotas, arguing that these policies would lead to "reverse discrimination" and harm corporate performance. Against companies like Disney and Amazon, they questioned the companies' excessive pandering to progressive agendas and argued that companies should focus on profitability rather than "pleasing minority groups". With the inauguration of Trump and his supportive attitude towards cryptocurrency policies, the organization has since promoted Bitcoin adoption through FEP to various listed companies, including not only Microsoft but also giants like Amazon.
With the formal rejection of this proposal, BTC price once fell to $94,000 and then quickly rebounded. From the degree of price fluctuations triggered by this event, we can easily observe that the current market is actually in a state of anxiety, and the point of anxiety is what the new source of growth for BTC's market capitalization will be after it has broken through historical highs. From some recent signs, we can see that some key leaders in the crypto world are choosing to leverage the wealth effect of MicroStrategy to promote the financial strategy of configuring BTC on the balance sheet to listed companies, in order to achieve the effect of fighting inflation and performance growth, thereby gaining greater adoption of BTC. So now let's look at whether this strategy can succeed.
BTC as a substitute for gold, becoming a value storage target globally, still has a long way to go and is not easy to succeed in the short term
First, let's analyze the first attraction of this strategy, whether the effect of fighting inflation by configuring BTC is valid in the short term. In fact, when it comes to fighting inflation, the first thing that comes to mind is usually gold, and in the Fed chairman's press conference at the beginning of the month, he also mentioned the view that Bitcoin is a competitor to gold. So can Bitcoin become a substitute for gold and become a value storage target globally?
This question has always been the focus of the discussion on the value of Bitcoin, and many people have made a lot of arguments based on the similarity of the native attributes of the assets, which I won't go into here. What I want to point out is how long it will take to realize this vision, or whether this vision can support the current valuation of BTC. My answer is that it is not easy to achieve in the foreseeable four years, or in the short to medium term, so using this as a short-term promotion strategy is not very attractive.
Let's look at how gold has developed to its current position as a value storage target. As a precious metal, gold has always been seen by various civilizations as a precious item with universality. The core reasons are as follows:
Here is the English translation of the text, with the specified terms preserved:- The obvious luster and excellent ductility give it use value as an important decorative item.
- The relatively low output has brought scarcity to gold, thus endowing it with financial properties, making it easy to be chosen as a class symbol in a society with class divisions.
- The widespread global distribution of gold and the relatively low difficulty of mining have enabled various civilizations to be unrestrained by factors such as culture and productivity development, so the dissemination of value culture is from bottom to top, with a wider range of dissemination.
These three properties have formed a universal value, making gold play the role of currency in human civilization, and the entire development process has also made the intrinsic value of gold stable. So we see that even if sovereign currencies abandon the gold standard, and modern financial instruments give it more financial properties, the price of gold basically follows the long-term growth rule, and can reflect the real currency purchasing power situation quite well.
However, it is not realistic for BTC to replace the position of gold in the short term. The core reason is that its value proposition as a cultural perspective is bound to be contracting rather than expanding in the short and medium term, for two reasons:
- The value proposition of BTC is top-down: As a virtual electronic commodity, the mining of BTC requires computing power competition, with two decisive factors, electricity and computing efficiency. First, the electricity cost actually reflects the industrialization level of a country, and the cleanliness of the energy behind the so-called electricity determines the future development potential. And computing efficiency requires reliance on chip technology. To put it directly, it is no longer simply a matter of individual PCs to obtain BTC, with the development of technology, its distribution will inevitably be concentrated in a few regions, and the undeveloped countries with the main global population distribution, which do not have competitive advantages, will be difficult to obtain, which will have an adverse impact on the efficiency of the dissemination of this value proposition, because when you cannot master a certain resource, you can only become the object of its exploitation, which is why stablecoins will compete with the sovereign currencies of some countries with unstable exchange rates, and from the perspective of national and ethnic interests, this naturally cannot be recognized, so it is difficult to see undeveloped countries encouraging this value proposition.
- The retreat of globalization and the challenge to the US dollar hegemony: We know that with the return of Trump, his pursuit of isolationism will deal a relatively heavy blow to globalization, and the most direct impact will be on the influence of the US dollar as the global trade settlement target. This has led to a certain challenge to its US dollar hegemony, a trend also known as "de-dollarization". The whole process will lead to a decline in the short-term global demand for the US dollar, and BTC, as a currency mainly priced in US dollars, will inevitably raise the cost of obtaining it in the whole process, thus increasing the difficulty of promoting the value proposition.
Of course, the above two points only discuss the development challenges of this trend at the macro level in the short and medium term, and do not affect the narrative of BTC as a gold substitute in the long run. And the most direct impact of these two points in the short and medium term is reflected in the high volatility of its price, because the rapid rise in its value in the short term is mainly based on the increase in speculative value, rather than the increase in the influence of its value proposition. Therefore, its price fluctuations are more in line with speculative commodities, with high volatility. Of course, due to its scarcity, if the US dollar continues to be over-issued and its intrinsic purchasing power continues to decline, all US dollar-denominated commodities can be said to have a certain anti-inflationary property, just like the luxury goods market in recent years, but this anti-inflationary property is not enough to make BTC more competitive than the store of value effect of gold.
Therefore, I believe that using anti-inflation as the focus of short-term promotion and marketing is not enough to attract "professional" clients to choose to allocate BTC instead of gold, because its balance sheet will face extremely high volatility, and this volatility cannot be changed in the short term. Therefore, it is more likely that in the coming period, large listed companies with stable business development will not choose to aggressively allocate BTC to deal with inflation.
BTC to succeed AI as the core driver of economic growth in the new political and economic cycle under Trump's administration
Next, let's discuss the second point, that is, whether the financial strategy of some stagnant listed companies to achieve overall revenue growth by allocating BTC and thereby driving market capitalization growth can be more widely recognized, which I believe is the key to whether BTC can obtain new value growth in the short and medium term, and I believe this is easy to achieve in the short term, in which process BTC will succeed AI as the core driver of economic growth in the new political and economic cycle under Trump's administration.
In the previous analysis, we have analyzed the successful strategy of Microstrategy quite clearly, that is, to convert the appreciation of BTC into the growth of the company's business revenue, thereby driving the company's market value, and this is indeed very attractive to some companies with stagnant growth, after all, passively embracing a trend is more comfortable than burning oneself to build a business. You can see that many companies that are withering away, with their core business revenue declining rapidly, have finally chosen to allocate the remaining output with this strategy to preserve some opportunities for themselves.
And with the return of Trump, his internal government spending reduction policy will have a significant impact on the economic structure of the United States. Let's look at a data point, the Buffett indicator of the US stock market. The so-called Buffett indicator, the investment guru Buffett mentioned in an article in Forbes magazine in December 2001: the ratio of the total market capitalization of the stock market to GDP can be used as an indicator to judge whether the overall stock market is overvalued or undervalued, and is therefore generally referred to as the Buffett indicator. This indicator can measure whether the current financial market reasonably reflects the fundamentals, Buffett's theoretical index indicates that 75% to 90% is a reasonable range, and exceeding 120% indicates that the stock market is overvalued.
We can see that the current Buffett indicator of the US stock market has exceeded 200%, indicating that the US stock market is in a state of extreme overvaluation, and the core driving force that has prevented the US stock market from experiencing a correction due to monetary policy tightening in the past two years has been the AI sector represented by Nvidia. However, with Nvidia's third-quarter financial report showing a slowdown in revenue growth, and its performance guidance indicating that revenue will further slow down next quarter. And the slowdown in growth is obviously not enough to support such a high price-to-earnings ratio, so there is no doubt that the US stock market will be under significant pressure in the coming period.
As for Trump, the specific impact of his economic policy is undoubtedly full of uncertainty in the current environment, such as whether the trade war will trigger internal inflation, whether the reduction in government spending will affect the profits of domestic companies and lead to a rise in unemployment, and whether the reduction in corporate income tax will further exacerbate the already severe fiscal deficit problem. In addition, Trump seems to have more determination to rebuild the ethical morality within the United States, and the impact of the advancement of some culturally sensitive issues, such as strikes, demonstrations, and the reduction of illegal immigrants leading to labor shortages, will also cast a shadow on the economic development.
If an economic problem were to arise, a stock market crash in the highly financialized United States would have a serious impact on its approval ratings, which would in turn affect the effectiveness of its internal reforms. Therefore, it would be very worthwhile to implant a core that is already under control and drives economic growth into the US stock market, and I believe that core is BITCOIN.
We know that the recent "Trump trade" that occurred in the crypto world has fully demonstrated its influence on the industry, and most of the companies supported by Trump are traditional domestic industries, not tech companies, so their businesses did not directly benefit from the entire AI wave in the previous cycle. However, if the situation develops as we have described, things will be different. Imagine if domestic small and medium-sized enterprises in the US choose to allocate a certain amount of BITCOIN reserves on their balance sheets. Even if their main business is affected by some external factors, Trump can stabilize the stock market to a certain extent by simply advocating some crypto-friendly policies to drive up the price. This targeted stimulus is highly efficient and can even bypass the Federal Reserve's monetary policy, making it less susceptible to the constraints of the establishment. Therefore, in the upcoming new US political and economic cycle, this strategy is a good choice for the Trump team and many US small and medium-sized enterprises, and its development process is worth watching.
