Amid international crises and a shaky crypto market, debates rage on about what role Bitcoin actually serves as an investment. Is it digital gold, or just another risk asset?
In a recent tweet, Ki Young Ju – CEO of crypto market analytics firm CryptoQuant – weighed in on the matter. He believes that as long as institutions like MicroStrategy continue buying Bitcoin, the asset’s “digital gold” narrative continues to apply.
Ju offered his thoughts in response to thread by FTX CEO Sam Bankman Fried (SBF) earlier today. The billionaire exchange owner gave a personal analysis about how Russia’s recent invasion of Ukraine is affecting crypto prices, and why.
After the invasion made headlines yesterday, Bitcoin’s price tumbled below $35k, before recovering to approximately $36k at the time of writing.
Going by Bitcoin’s “fundamentals”, SBF predicted that Bitcoin should not have moved drastically in either direction. Theoretically, while war may incite people to withdraw their money from the asset and into cash, it might also spur people to move away from weak European currencies, and into harder ones.
Due to Bitcoin’s limited supply of 21 million coins, some view the cryptocurrency as the hardest currency on Earth, capable of replacing the dollar. Its production difficulty mimics that of gold, earning it the moniker “digital gold”.
Given this context, SBF explains Bitcoin’s recent drop as being spurred by “algorithm followers” rather than “fundamental investors”. He argued that the push-pull dynamic between these groups made Bitcoin decline by exactly 8% on the day.
That’s where CryptoQuant’s CEO chimed in. He confirmed that there’s been “no significant on-chain activities” in response to the war, suggesting that SBF’s thesis about fundamental investors was correct.
“Institutions who bought $BTC via on-chain txns seem [to have] not sold their holdings yet,” said Ju. “Institutions running algorithmic trading bots think BTC is a tech stock.”
The CEO concluded that he’d prefer to stay exposed to Bitcoin until Michael Saylor – CEO of MicroStrategy – sells any of his. “The digital gold narrative is still valid as long as these institutions hold Bitcoins,” he said.
Saylor’s company is one of the largest individual holders of Bitcoin, reportedly owning over 125,000 coins as of February. The CEO has repeatedly referred to the asset as “digital gold,” and recently told Bloomberg that he’d never sell his holdings.