Risk on or Risk off?!

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Many people look at Bitcoin as a risk-on asset. It's traded like a risk-on asset and it has performed like a risk-on asset. But will Bitcoin remain a risk-on asset for the next 20 years? I don't think so.

Why Bitcoin is a risk-on asset now

The value of Bitcoin and other cryptocurrencies has regularly been tied to the value of tech stocks. When tech stocks go up, crypto goes up and if tech stocks go down, crypto goes down. Bitcoin is a new technology and is highly speculative and depends on the growth of its network for success. It also still has a (relatively) high rate of new Bitcoin mined. Many different technologies need to be added to Bitcoin so it can serve billions of people including:

  • Layer 2 solutions for quicker and cheaper transactions.
  • Better onboarding processes for new users.
  • Easier ways for businesses to accept $BTC as payment.
  • More use cases for Bitcoin like ordinals and BRC20 tokens.

So there's a lot of speculation on the validity of Bitcoin and whether it will succeed. And because of this speculation, Bitcoin has a lot of volatility. The volatility alone makes it a risk-on asset that makes risk-adverse investors not hold onto it. What could make this change?

Bitcoin as a safe haven?

As Bitcoin grows and gains more users it should become less volatile over time. This will change the general public's impression of it and make people stop treating it like a penny stock. When more users join Bitcoin there will be more countries that join it as well (like El Salvador) and large businesses accept it as payment. This will cause even less volatility and more perception of safety. The narrative of digital gold will catch on if mass adoption happens.

Mass adoption will not take place in this bull run but we should expect to see far more new users to come to Bitcoin. We must adopt layer 2 solutions that pave the way for the next 500 million users. In the next 500 days, there's no reason we can't onboard another 500 million Bitcoiners. But are we ready for them?

If we successfully onboard the next 500 million users the path of Bitcoin becoming a store of value like gold and the US dollar is even more likely. We must secure a decentralized risk-off asset. Not so we can get rich but so we can maintain financial freedom. Who's with me?

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Notes and Disclosures

This post is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. Certain information presented is gathered from third parties and has not been independently verified. The views expressed here are those of the individual author and are not the views of 1.2 Labs Inc. or its affiliate firms. If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. No statements are legal advice and you are encouraged to consult your own legal professional. No statements about investing constitute investment advice and you are encouraged both to do your own due diligence research before investing and to consult an investment professional in that process.

Finally, as the author of this report, you should recognize that I do actively invest. Many of my trades are quick and I do write about many investment items, whether stocks, coins, collectibles, and the like which I do not own. For the purposes of disclosing any conflicts of interest, assume that if it is covered, I own the investment item. Or if my coverage is negative that I am short the investment item.

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