Critics cheer from the sidelines. Bitcoin (CRYPTO: BTC) Its perception as a store of value remains undeterred by macro and geopolitical uncertainty. As of March 5, it was trading 44% off its high from last October.
Financial markets are complex, so it is not always easy to find a clear explanation for each asset’s price action. While I believe that the best cryptocurrency has great long-term upside, it is currently facing three trillion dollar competitive risks.
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Over the past decade, Bitcoin has skyrocketed nearly 18,000%. It now commands a meaningful market cap of $1.4 trillion. And given its neutral, digital, and decentralized nature, it competes for capital globally. This prevents large pools of capital that could divert attention away from Bitcoin.
For starters, nothing has captured the imagination of investors more recently than the artificial intelligence (AI) boom. Some of the most dominant businesses we’ve ever seen are going all out, sparing no expense to expand computing capacity to develop this technology. The ultimate payoff is highly uncertain. But the market is good, represented by the “Magnificent Seven” group with a total market of 20 trillion dollars, which represents about one-third. S&P 500 index, according to recent research by The Motley Fool.
Domestically, the U.S. housing market is a huge capital magnet, estimated at $55 trillion as of last June. The 30-year fixed mortgage rate is 6% for the first time since 2022. If prices continue to fall, home values could rise. For middle-class Americans, homes are the leading store of wealth.
Another trillion dollars of competitive risk lies in US Treasuries, which currently have a nominal value of $29 trillion. It is a very liquid market. And they are backed by the full faith and credit of the United States government, making them essential reserve capital for central banks around the world.
Because Bitcoin is liquid and has a constantly updated market price, coupled with the fact that many investors still see it as a risky asset, it will remain volatile. It is hard to imagine that the buyers who entered the market in the last few years, whether individuals, institutions or governments, have as much confidence as the previous investors. It just means that they may be quick to sell when there is confusion.
