Here is an interesting piece by Nik Bhatia explaining the Triumvirate of Liquidity — US Treasuries, gold, and Bitcoin — the only safe have assets which shelter investors from systemic risks of the overextended global financial system, the liquid assets to which investors flee amid turmoil.
This article details each of the trio’s role in the current financial system. While Bitcoin is currently only a small piece of the Triumvirate, the conclusion to be derived from this article is that Bitcoin will subsume both USTs and gold to to become the most important piece of the Triumvirate and the world’s next risk-free asset.
To me, this isn’t at all far fetched. In fact, I think it’s obvious. Bitcoin’s is the world’s ultimate safe haven asset because it simply has superior monetary properties to gold. Bitcoin’s equity-based nature, final settlement, easy verifiability, and the ability to monitor funds on the blockchain also make it the world’s best collateral, a role it will widely assume after its market depth and hedging products grow (both of happening rapidly right now). It’s also fairly obvious that the world needs a new ‘risk-free asset’ (a term I’ve always hated, nothing is truly risk-free!) because the world’s current risk-free asset, US Treasuries, are issued by an insolvent government while providing a zero-bound or even negative real yield — instead making it a return-free risk.
So…
What’s the endgame? Bitcoin is. Its software is engraved with “Chancellor on the Brink of Second Bailout” to proclaim an elegant solution to our banking system nightmare. Bitcoin is a bearer asset like gold, a risk-free asset like Treasuries, and a currency denomination like the dollar, rising up in parallel over the next couple decades as the infrastructure for the next financial system.
Gold and Bitcoin are both scarce assets without counterparty risk, yet Bitcoin’s digital final settlement functionality gives it a massive advantage over gold in the coming decades. Bitcoin is not only digital gold though, it’s also digital Treasuries. Bitcoin is the safe haven from all other digital assets, just as Treasuries are the safe haven from all other dollar assets. Bitcoin is used as collateral for derivatives agreements just like Treasuries are. But Bitcoin doesn’t have the counterparty risk or supply variability of Treasuries, positioning it perfectly for the forthcoming competition.
Bitcoin is the risk-free asset of the future.
I really like the note-like Bitcoin image/art above. It’d look pretty cool as a poster or printout framed on my wall. Hmmmmm…