I saw Dune 2 this week and it is absolutely incredible. It’s a biblical epic set in future antiquity. The Fremen believe in a messiah that will come to lead them to paradise. But what happens when Paul Atreides, the alleged messiah, arrives and is in on the ruse? His mother is part of the Bene Gesserit, a group of priestesses who originally planted the seed a millennia ago. They understand that the Fremen, in all their suffering, will cling to their faith and follow their savior in fighting their pre-planned holy war. Which reminded me of Bitcoin.
Here we go again
Bitcoin hit an all-time high this week surpassing $69K. The crypto bros have risen from the depths of despair and are back on Twitter (X, I know) spreading the good news. Wait, but I thought the previous crypto bonanza was the product of a zero-interest environment and easy money? But rates are high and Bitcoin is hitting all-time highs. As one creator put it:
The reason we’re having this speculative activity is because of trust. Trust in institutions is at an all time low and the adoption of crypto is essentially a reflection of that. - TikTok from Kyla Scanlon.
I usually refrain from diving into the crypto rabbit hole, but I suspect something is amuck. So let’s entertain the idea for a bit and acknowledge the underlying forces that shape human beliefs. At the heart of the Bitcoin community lies a dedicated group known as "HODLers" (a misspelling of "hold" that has become a ubiquitous term):
"HODL" means to retain and keep a cryptocurrency asset rather than selling it, especially during periods of market volatility. This approach stems from the belief that, despite short-term market fluctuations, the value of the cryptocurrency will increase in the long run. HODLing is more than a mere investment tactic; it's a testament to the faith holders have in the underlying technology and the transformative potential of cryptocurrencies. - HODL, Koinly
What’s so special about the underlying technology? Well, let’s take a look at the Bitcoin Manifesto, the original white paper from the infamous and anonymous Satoshi Nakamoto:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments… Merchants must be wary of their employees stealing information directly from the databases. These issues undermine the ability of these systems to make non-reversible payments. - Bitcoin: A Peer-to-Peer Electronic Cash System.
So according to Nakamoto, these inherent weaknesses and vulnerabilities of trusted third-party-based models underscore the need for an alternative system. We must break the chains of monetary policy and free the financial system. 2024 is an election year and the people are blue with inflation and widespread layoffs. The allure of Bitcoin as an alternative asset class operating outside centralized control sounds interesting. A sort of new hope. As Nakamoto envisioned, "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
Faith is nice, but back to the news.
Institutional Money
The SEC has been flirting with Bitcoin for the past couple of years and finally gave in. Subsequent Bitcoin spot ETF approvals in 2022 and 2023 that directly hold the underlying Bitcoin look to have fueled demand from investors. One of the issues with Bitcoin was access. People just didn’t have the time to do the research and all the apps look pretty sketchy if we’re being honest. They want to invest in what they know, and they know ETFs. Now they can easily buy into Bitcoin through traditional brokerage accounts.
The iShares Bitcoin ETF (ticker IBIT) pulled $788.3 million Tuesday, its 37th consecutive inflow. The fund has now swelled to $11.5 billion in assets.
Bitcoin briefly topped $69,000 on Tuesday, surpassing the all-time high it hit in late 2021. Demand from the ETFs and a optimism surrounding an upcoming reduction in the token’s supply growth have fueled recent gains, though the coin is now trading near $67,000, likely following profit-taking. - BlackRock’s Bitcoin ETF Draws Record Influx as Coin Tops $69,000, Bloomberg
Not everyone’s an anarchist, and validation from the SEC gives the public a safer chance to indulge.
I don’t think anyone can give a clear reason as to why this is happening. Bitcoin is a speculative asset, so let me speculate. I think the combination of dwindling trust in traditional financial institutions and the allure of an alternative system that operates outside centralized control has propelled Bitcoin into the spotlight once again. While faith will continue to play a role in its valuation, the growing acceptance of Bitcoin by mainstream investors and regulatory bodies like the SEC suggests that cryptocurrencies are becoming an integral part of the financial landscape. But I wonder if the adoption will lead to more interest. Has the SEC inadvertently given the HODLers a batch of new followers?
Thank you
There’s a lot of back and forth in Dune 2 that questions whether Paul is the messiah or not. He has all the signs and is doing all the things as they were written, but is that because he’s always known or because he actually is? Have the HODLers, who truly believe Bitcoin can free us from the financial headlock of institutions, considered what the other side looks like? I know it’s dramatic to compare that to the holy war, but the idea of holding on for dear life already indicates desperate action if necessary. As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Threads, follow me on TikTok, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with.