"Fidelity, the multinational financial services corporation, praises Bitcoin in a lengthy article: an ideal store of value."

The U.S. multinational financial services corporation Fidelity Investments' subsidiary, Fidelity Digital Assets, released the first report in its "Bitcoin Investment Thesis" series today (30). The report, titled "AN ASPIRATIONAL STORE OF VALUE", will be summarized in this article. It is important to note that this group is not new to advocating for Bitcoin, as they have also invested in cryptocurrency trading platforms, custody services, and Bitcoin mining.

The Bitcoin Journey

Fidelity points out that due to the increasing interest of the public in investing in Bitcoin, and Bitcoin gradually entering traditional investment markets and the portfolios of the public, they hope to provide comprehensive analysis for investors based on theory and release a series of reports in the future.

Looking back on history, there has been ongoing debate among the public as to whether Bitcoin serves as a store of value, a medium of exchange, or a substitute asset. Fidelity believes that there are still variables, and even the uncertainty of whether asset settlement function is the best use case for blockchain. However, as the system matures, Bitcoin may gradually play a role in various applications, and this report will focus on the viewpoint of "Is Bitcoin an ideal store of value." The highlights of Bitcoin listed by Fidelity are as follows:

• Generally seen by investors as an ideal store of value tool, but not yet widely accepted by the majority of the world
• Immutable scarcity as a key feature
• Independence of monetary policy built by decentralized proof-of-work
• Low interest rates and stimulus measures are driving the adoption and popularity of Bitcoin

Ideal Store of Value

Fidelity believes that Bitcoin is an ideal store of value and will create tremendous value as the system matures, likening investing in Bitcoin to investing in Facebook when it only had 50 million users, compared to its current 2 billion users. Fidelity quoted the famous "self-fulfilling prophecy" mentioned by Satoshi Nakamoto in the early days:

Bitcoin is a self-fulfilling prophecy. Maybe you should keep a few bitcoins in your hand in case it takes off?

The original self-fulfilling prophecy is a psychological phenomenon, and what Satoshi Nakamoto meant was that the more people believe it has value, the more valuable it will actually become, referring to the collective consensus on the value of money.

Fidelity also mentioned the highly controversial price volatility of Bitcoin and presented another perspective: "For the growth trajectory of emerging assets, from being ignored by the public, gradually recognized, to adoption, the price volatility is unlikely to be linear, and as participants conduct further research, they focus more on long-term value."

Based on Digital Scarcity

Fidelity mentioned the most critical new technology of Bitcoin - its immutable digital scarcity, which is also the most cherished feature by investors. The circulation of Bitcoin is regulated by code-based monetary policy, and it has already undergone the third halving of block rewards, reducing from 12.5 to 6.25 bitcoins, and the annual issuance rate has also decreased to below 2% from 3.5%.

The report also cited the stock-to-flow valuation model proposed by the renowned Bitcoin analyst PlanB. In this model, gold still holds the highest stock-to-flow ratio among contemporary assets as a store of value tool. However, with Bitcoin's halving this year and the next halving of block rewards expected in 2024, Bitcoin will become the scarcest asset.

Demand Will Drive Adoption

Due to the impact of COVID-19, authorities and central banks around the world have reached the peak of intervention in monetary policy, announcing over 285 economic stimulus measures in eight months, including negative interest rates and unprecedented quantitative easing policies.

Fidelity points out that even before this year's economic crisis, investors had already predicted that central banks would only resort to printing money to stimulate the economy. They believe that these measures may lead to potential inflation, which could drive the adoption of Bitcoin and even further opportunities for wealth transfer among the millennial generation.

Institutional perspective is also an important indicator. Fidelity referenced a report by Wall Street investment legend Paul Jones in May of this year, where Jones was bullish on Bitcoin, comparing it to gold. He believed that Bitcoin is similar to gold in the 1970s before its massive surge, stating:

"Traditional hedge assets like gold have performed well, and we believe investors will continue to seek refuge assets. ... Markets often react and contradict your previous experiences. But remember, in the long run, profit and loss are always winners. Considering this, in a world eager for new refuge assets, the role of Bitcoin may become increasingly significant."

In an environment of ongoing inflation, the purchasing power of the US dollar continues to decline. Fidelity points out that long-term inflation erodes the purchasing power of fiat currency, prompting the public to seek investment in financial assets as a means of asset protection. Bitcoin supporters also believe that as the public gradually realizes that it is a tool for long-term value storage, the demand for Bitcoin will continue to grow.

Fidelity concludes that the characteristics of Bitcoin have captured public attention, and therefore Bitcoin may become a store of value tool. The key to adoption will be long-term demand, and importantly, the younger generation has a more optimistic view of Bitcoin. The report also indicates that 77% of millennials believe that the financial system is designed to support the wealthy and that it is only a matter of time before the next global financial crisis occurs.