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 hot spots may be the norm for most small and medium-sized startups struggling in the Web3 industry, and the author also hopes that everyone can understand and continue to support. To the point, this week the author hopes to discuss a viewpoint that he has been thinking about recently, which can also explain the reason for the recent violent market fluctuations. That is, after the BTC price breaks through 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 has 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.
With the wealth effect of MicroStrategy unfolding, the market has begun to speculate whether more listed companies will choose to allocate 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 and $101,000. There are two core reasons, which I will briefly explain to you.
First, we need to trace back to December 10, when Microsoft officially rejected the "Bitcoin Treasury 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 BTC as a potential hedge against inflation. Prior to this, MicroStrategy founder Saylor had also publicly declared 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 the government, political parties or business companies. Most think tanks are non-profit organizations and are not official institutions. This operating model can be tax-exempt in countries like the United States and Canada, and the opinions they output usually need to serve the relevant interests of their sponsors. NCPPR, established in 1982 and headquartered in Washington, D.C., has a certain influence among conservative think tanks, especially in supporting free markets, opposing government over-intervention, and promoting corporate responsibility, but its overall influence is relatively limited compared to 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 suspected 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, they have submitted proposals to companies like JPMorgan Chase, opposing mandatory racial and gender quotas, arguing that these policies will lead to "reverse discrimination" and harm corporate performance. For companies like Disney and Amazon, they question the companies' excessive pandering to progressive agendas and argue that companies should focus on profitability rather than "pleasing minority groups". With the inauguration of Trump and his supportive attitude towards cryptocurrencies, the organization has also promoted BTC adoption to various listed companies through FEP, including giants like Amazon in addition to Microsoft.
With the formal rejection of the proposal, the 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 cap will be after it has broken through the historical high. From 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 more listed companies, in order to achieve the effect of fighting inflation and performance growth, thereby increasing the adoption of BTC. So let's take a look at whether this strategy can succeed.
BTC as a substitute for gold, becoming a value storage target globally in a broad sense, 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 Chair Powell's press conference at the beginning of the month, he also mentioned the view that BTC is a competitor to gold. So can BTC become a substitute for gold and become a value storage target globally in a broad sense?
This question has always been a focus of the discussion on the value of BTC, 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 this 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:
The obvious luster and excellent ductility make it have use value as an important decorative item.
The relatively low output makes gold have scarcity, thereby endowing it with financial attributes, making it easy to be chosen as a class symbol in a society with class divisions.
The widespread distribution of gold globally and the relatively low difficulty of mining make it not constrained by factors such as culture and productivity development, so the spread of value culture is more widespread from bottom to top.
Relying on these three attributes to form universal value has made 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 can see that even if sovereign currencies have abandoned the gold standard and modern financial instruments have given it more financial attributes, the price of gold has basically followed the rule of long-term growth, and it can reflect the real purchasing power of currency 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 view will contract rather than expand in the short to medium term, for two reasons:
Here is the English translation of the text, with the specified abbreviations retained:The value proposition of BTC is top-down: As a virtual electronic commodity, the mining of BTC requires competition in computing power, with two determining factors - electricity cost and computing efficiency. Electricity cost reflects a country's industrialization level, and the cleanliness of the energy behind the electricity determines the future development potential. Computing efficiency relies on chip technology. To put it directly, obtaining BTC can no longer be achieved solely with a personal PC, as the technology develops, its distribution will inevitably concentrate in a few regions, and the undeveloped countries with the main global population distribution, which lack competitive advantages, will find it difficult to obtain, which has 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 standard. 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 global demand for the US dollar in the short term, and as BTC is mainly priced in US dollars, its cost of acquisition will inevitably rise in the process, making it more difficult to promote its 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. The most direct impact of these two points in the short and medium term is reflected in the high volatility of its price, because its rapid price increase in the short term is mainly based on the increase in speculative value, rather than the enhancement of its value proposition. Therefore, its price fluctuations are more in line with speculative commodities, with high volatility. However, due to its scarcity, if the US dollar continues to be over-issued and its purchasing power declines, 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 gold in terms of its store of value effect.
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 rather than 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 hedge against inflation.
BTC to succeed AI as the core driver of economic growth in the new political and economic cycle under Trump's presidency
Next, let's discuss the second point, which is whether the financial strategy of some stagnant listed companies to achieve overall revenue growth and market value appreciation through BTC allocation can gain wider acceptance, as I believe this is the key to whether BTC can achieve new value growth in the short and medium term, and I believe this is easier 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 presidency.
In the previous analysis, we have analyzed the successful strategy of Microstrategy quite clearly, which is to convert the appreciation of BTC into revenue growth for the company, thereby driving up 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 ultimately chosen to allocate their remaining productive capacity to this strategy to preserve some opportunities for themselves.
With Trump's return, his internal policy of reducing government will have a significant impact on the US economic structure. Let's look at a data point, the Buffett indicator of the US stock market. The so-called Buffett indicator, which the investment guru Buffett mentioned in an article in Forbes magazine in December 2001, is the ratio of the total market capitalization of the stock market to GDP, which can be used to judge whether the overall stock market is overvalued or undervalued, and is therefore known as the Buffett indicator. This indicator can measure whether the financial market currently reasonably reflects the fundamentals, and Buffett's theoretical index indicates that 75% to 90% is a reasonable range, and over 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 slow further next quarter, the slowdown is obviously not enough to support such a high price-to-earnings ratio, so there is no doubt that the US stock market will come under significant pressure in the coming period.
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 domestic inflation, whether the reduction in government spending will affect corporate profits, and the problem of rising unemployment rates, and whether the reduction in corporate income tax will further exacerbate the already severe fiscal deficit. In addition, Trump seems to have more determination to rebuild the ethical and moral standards within the US, and the impact of his progress on some culturally sensitive issues, such as strikes, protests, and the reduction of illegal immigration leading to labor shortages, will also cast a shadow over economic development.
If an economic problem is triggered, in the currently highly financialized US, it will specifically refer to a stock market crash, which will have a serious impact on his approval rating and affect the effectiveness of his internal reforms. Therefore, it would be very beneficial to implant a core driver of economic growth that is already under control into the US stock market, and I believe that BTC is a very suitable one.
We know that the recent "Trump trade" in the crypto world has fully demonstrated his influence on the industry, and the companies Trump supports are mostly traditional local industries, not tech companies, so their businesses did not directly benefit from the AI wave in the previous cycle. If the situation develops as we have described, things will be different. Imagine if US local small and medium-sized enterprises choose to allocate a certain amount of BTC reserves on their balance sheets, even if their core 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. And this targeted stimulus is highly efficient, and can even bypass the Federal Reserve's monetary policy and avoid being constrained by 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.
