Bitcoin has recently experienced a period of significant volatility, with its price retracting by 27% since reaching an all-time high of $126,000 on October 6th. The dip, which saw the digital asset briefly fall below the $90,000 threshold earlier this week, has sparked widespread concern among investors, prompting questions about the potential onset of a bear market. However, Matt Hougan, Chief Investment Officer at Bitwise, remains unfazed, dismissing the current downturn as merely a “short-term correction.” Hougan asserts that Bitcoin’s enduring value is not dictated by transient price swings but by the “unique service” it provides to both institutional and individual investors.
In a client memo published on Tuesday, Hougan revealed that his discussions with financial advisors invariably begin with a fundamental query: “What truly gives Bitcoin its value?”
Beyond the Object: Bitcoin as a Service
It’s a valid question. Bitcoin, unlike traditional assets, generates no profits, offers no cash flow, distributes no dividends, and lacks any physical form. Yet, it commands a staggering market capitalization of up to $2 trillion. Hougan attributes the market’s confusion to a persistent tendency to view Bitcoin as a tangible “object” rather than recognizing its intrinsic worth as a “service.”
He elaborates that Bitcoin’s profound value lies in its unparalleled ability to store wealth digitally, free from reliance on governments, banks, or any other third-party intermediaries. Hougan argues that by shifting this perspective and redefining Bitcoin as a “service,” many initial reservations about investing in this “intangible asset” naturally dissipate. This concept mirrors the established practice of paying for valuable services, with Microsoft serving as a prime example.
“The valuation of Microsoft’s stock,” Hougan illustrates, “is directly tied to the demand for its software services.”
Bitcoin, he continues, operates under the same fundamental law of supply and demand: “The greater the demand for Bitcoin’s service, the higher its value; conversely, if demand wanes, its value will decrease; if it garners no interest, its value would be zero.”
Acquiring the Service: A Unique Proposition
However, a crucial distinction exists: one cannot simply “subscribe” or “rent” Bitcoin’s service in the same way they might subscribe to Office 365. Hougan emphasizes that the sole pathway to access this invaluable service is through the direct purchase of Bitcoin itself.
The compelling evidence of surging demand for this service is reflected in Bitcoin’s astonishing 28,000% appreciation over the past decade.
Today, the “clientele” for this service reads like a who’s who of global finance: from the venerable Harvard University endowment and the formidable Abu Dhabi sovereign wealth fund, to Wall Street titans like Ray Dalio and Stanley Druckenmiller, alongside numerous national pension funds and millions of individual retail investors, all are actively seeking to leverage this unique offering.
Matt Hougan concludes with a forward-looking perspective: “In an increasingly digitized world, coupled with the escalating debt burdens of governments globally, my conviction is that the demand for Bitcoin’s service will only continue to grow exponentially in the years to come.”
Disclaimer: This article is intended solely for providing market information. All content and views expressed herein are for reference purposes only and do not constitute investment advice. They do not represent the views or positions of BlockTempo. Investors are advised to make their own independent investment decisions and trades. The author and BlockTempo shall not be held liable for any direct or indirect losses incurred by investors as a result of their transactions.
