Stone Ridge CEO touts Bitcoin as stable store of value

Stone Ridge Asset Management CEO Ross L. Stevens challenges the traditional notion of Bitcoin as a high-risk asset by showcasing its stability and reliability as a store of value, contrasting its performance with long-term U.S. Treasury bonds.

This viewpoint diverges from the cautious approach typically adopted by the mainstream financial industry towards cryptocurrencies, as Stevens believes Bitcoin could serve as a hedge against the risks linked to fiat currencies.

Really enjoyed [Ross Steven’s] Stone Ridge 2023 investor letter. Worth a read:https://t.co/8oOvl2MPbK

— Will (@WClementeIII) December 31, 2023

According to Stevens, long-term fiat savings (20Y+ U.S. Treasuries Index) yielded cumulative returns of two percent, -33 percent, -8 percent, and 24 percent for the last one, three, five, and ten years, respectively. In contrast, long-term non-fiat savings, such as Bitcoin, showcased cumulative returns of 156 percent, 46 percent, 1,052 percent and 5,569 percent for the same periods.

“Which one is risky? Which one is ‘backed by air’? Which one should we ‘close it down’? Which is the one we don’t need?” Stevens wrote.

Stevens rebuts criticisms of Bitcoin’s intrinsic value by emphasizing the vast stored energy within its blockchain, affirming its security. He argues that Bitcoin’s Proof of Work process, accumulated over a decade, solidifies its value.

Although facing skepticism from certain government and financial figures, Stevens acknowledges Bitcoin’s significant market value and expanding adoption. He perceives the increasing recognition of Bitcoin as a legitimate financial asset as evidence of its potential and a demonstration of the free market acknowledging its inherent value.

Risky and volatile

The public typically views Bitcoin, alongside other cryptocurrency, as exceptionally risky. As per The Times, Bitcoin’s value is based on speculation and characterized by high volatility. This stands in contrast to company stocks, which typically fluctuate based on the performance of the business.

Following its peak in 2021, Bitcoin faced a challenging period in 2022 characterized by the failure of various prominent projects, liquidity problems, and bankruptcies. By November 2022, the value of Bitcoin dropped below $16,000, as reported by Coinbase.

In 2023, its price drastically recovered, recording a remarkable 152 percent increase for the year. As of December 20, 2023, Bitcoin stands at $42,853, with a market capitalization of $837.54 billion and a market volume of $21.19 billion.

Investors are optimistic about Bitcoin in 2024 mainly due to two primary factors. The first factor is the upcoming “halving” is scheduled for April. Historically, Bitcoin’s price rose substantially in the months surrounding this event. The second factor is the imminent anticipated approval of several Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC).

These factors are why prominent investor Mark Mobius informed CNBC about the potential for Bitcoin to hit $60,000 by year-end. Previously, Mobius accurately predicted Bitcoin’s drop to $20,000 when its trading value was over $28,000 in 2022.

Bit Mining chief economist Youwei Yang is more optimistic in his forecast, suggesting Bitcoin could soar to $75,000 by 2024, citing similar reasons for this prediction.

“I anticipate the Bitcoin will be trading around $25K to $75K in 2024, and $45K to $130K in 2025,” Yang said in an emailed note.

However, investor and cryptanalyst Rekt Capital holds a contrasting view, suggesting that Bitcoin’s price (BTC) might decline to $37,000 soon. While a drop of over $5,000 from the current level could be seen as a healthy recovery, it may still have an impact on investors.

Aside from its volatility, several aspects of cryptocurrency lack regulation or are subject to changing laws. These fluctuations in regulations contribute to making crypto markets more susceptible to instability. An example is from the summer of 2021 when China’s crackdown on crypto-related activities aligned with a decline in Bitcoin’s price.

With numerous governments globally deliberating on how to respond to the growing adaptation of cryptocurrencies, various factors may continue to influence and contribute to the volatility of the crypto market in the future.