When it comes to bitcoin, there is some disagreement as to what its function is intended to be, or perhaps more accurately, what its function will actually become.
In fact, if we refer back to the Bitcoin Whitepaper of 2008, we can read in Satoshi Nakamoto's, the pseudonymous creator, own words the purpose for which bitcoin was first brought into existence. The very first line of the abstract reads as follows:
"A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."
The intent, then, is unambiguous: bitcoin is intended to be a currency, capable of replacing cash as a medium of exchange, but functioning peer-to-peer, digitally, and in a decentralized manner.
When a powerful creation is unleashed from a whitepaper into the real world, there are no guarantees as to whether it will stick to its original course, or take a detour. And, there is a very strong likelihood that even if it does eventually reach its final intended destination (as bitcoin plausibly can), it will pass through transitory phases along the way, which some observers might mistake for a final state.
And, so we have debates about whether bitcoin is, in fact, a store of value rather than a potential currency, or something else entirely, perhaps even being best regarded as a web-based tech investment. Certainly, you can find advocates for Ethereum and other smart contract blockchains who are of the opinion, likely erroneous or misguided, that Bitcoin has been superseded by its supposed competitors.
Corporate Interest
Wherever the end destination is for bitcoin, and aside from philosophical and practical debates about its utility, it increasingly functions as a speculative asset in investment portfolios, both retail and institutional.
The corporate aspect of this trend has ramped up significantly since 2020, with MicroStrategy as the most aggressive and outspoken bitcoin adopter. Not only has the company acted unequivocally and with remarkable conviction in purchasing bitcoin as its primary treasury reserve asset, but Michael Saylor, the Chairman and CEO, has taken on the role of public advocate/evangelist for a shift into bitcoin, doing so effectively and entertainingly.
This kind of corporate activity, see also interest from the likes of BlackRock and Renaissance Technologies, alongside the retail uptake that has always ebbed and flowed around bitcoin, often correlated with its halving cycles, leads to further debate, though, as to whether bitcoin functions as a risk-on or risk-off asset.
Risk-On or Risk-Off?
Along with the institutional interest in bitcoin, an increased correlation has come with the S&P 500, and at the same time, the S&P 500 has become more weighted towards what is regarded as riskier tech stocks.
It appears, then, that to the majority of corporate entities who are now comfortable engaging with bitcoin, the primary cryptocurrency is regarded as a high volatility risk-on asset to be loaded and unloaded in a similar manner to high-risk tech stocks.
However, this seems not to apply to MicroStrategy, which is taking the full long-term view of bitcoin as a profoundly transformative creation. MicroStrategy's perspective is similar to that of true-believer bitcoin advocates and maximalists, which is itself reflected in the behavior of dollar-cost averaging individual buyers whose philosophy is to stack sats and HODL, through rain or shine.
For these investors (if investor is even the correct categorization), bitcoin is a risk-off long-term store of value that might conceivably become exactly what it was first proposed to be: an actual, working decentralized currency. And, even if that final transition doesn't occur, the belief is that bitcoin will still be worth holding on to, and is safer and less uncertain than any other option currently on offer.
Also, it is worth noting that within the crypto markets, as broader conditions worsen, bitcoin dominance increases, emphasizing its status as an asset that is distinct from the wider, and riskier, blockchain-oriented web3 ecosystem.
Correlations Are Temporary
A lesson that can be drawn from all of this is that, at this current stage of bitcoin's evolution, it makes no sense to place a definitive categorization on the digital asset. Or, if a designation is attempted, then it must have caveats attached, meaning that we can say what bitcoin is currently behaving similarly to, but we can't accurately predict for how long any current correlation will continue, or whether it is actually meaningful in the long term.
What we can state with some certainty is that whatever bitcoin's current characteristics might be, they are likely to change if they are dependent on public perception, rather than on its intrinsic nature.
So, is bitcoin risk-on or risk-off, and returning to earlier questions, what is it for, and what will it become? To answer that, it is perhaps best to defer to that original whitepaper, penned by a figure whose true identity we don't know, and who stepped away from his own creation in order to let it fulfill its purpose.
According to the original intent, bitcoin is money, and every temporary stage it passes through, in terms of adoption, perception, and correlation with other assets, is leading towards that final state.
