A Bull vs. Bear Debate on Bitcoin


By Jeremy Schwartz, CFA, Global Head of Research

Last week’s Behind the Markets podcast featured a debate on the merits of Bitcoin with Alex Pickard, VP of Research at Research Affiliates, and Jason Guthrie, Head of Capital Markets and Digital Assets at WisdomTree Europe.

Pickard said he first came to Bitcoin in 2013 while studying financial engineering at UCLA, but he really gained the conviction to stay long in 2015 at a price level of around $ 500. He turned a profit into a startup to keep mining Bitcoin.

However, Pickard’s mining experience made him much more skeptical about cryptocurrency *. Pickard’s areas highlighted as risks include:

  1. The use case and narrative have shifted. Pickard was drawn to the ability to use Bitcoin for transactions and the democratization of the financial system. He’s frustrated with the high transaction fees on the network and ultimately expects the blockchain technology that dominates payments to be the one that can handle the most capacity at the lowest possible price.
  2. The possibility that tether is a factor influencing bitcoin prices. Tether is a stable coin that makes digital transactions easier. However, there are many questions about whether Tether has fiat currency assets to secure the coins in circulation and there is no transparency about its assets. While New York only settled litigation over Tether’s activities, there is a correlation between Tether’s activities and Bitcoin prices, which leads to questions about the drivers in Pickard’s mind. If Tether collapsed, and this is pure speculation, it could negatively cascade across the crypto space.
  3. Pickard questions the narrative “store of value” (traditionally associated with fiat currencies) for an asset as volatile as bitcoin. Pickard wonders how Bitcoin can be a store of value with the size and severity of the drawdowns experienced.
  4. Pickard referred to himself as a “Big Blocker” and prefers Bitcoin SV, a forked version of Bitcoin that allows for much larger blocks of transactions and promotes cheaper transaction fees. Bitcoin SV hasn’t captured the hearts and souls of the crypto community, but it is one that Pickard likes in the longer term.

Guthrie is more optimistic about Bitcoin and believes that we are still relatively early in the adoption cycle. Guthrie’s narrative focused on:

  1. Many are concerned about global money pressures causing fiat currencies to decline in value. The solid nature of the Bitcoin supply means that it cannot be devalued in the same way as fiat currencies, which is a similar rationale for gold. Bitcoin is the new generation of gold and has great appeal as an investment story.
  2. Guthrie believes that Bitcoin is a store of value. They are neither easily faked nor easily recreated, and they need to be easily transferable and durable. The next step is to make people want these assets en masse, which is what is happening to Bitcoin right now.
  3. Rising prices come from new investors who drive prices up with insatiable demand. Guthrie believes that we are relatively early on the institutional allocation curve. What began as a humble rollout of Bitcoin by small, nimble family offices for wealthier customers is getting more serious as larger private banks, institutions, and pension funds show newfound interest.
  4. Guthrie believes there are methods to facilitate Bitcoin off-chain transactions to get around Pickard’s transaction fee concerns. While Pickard remains concerned about the cost of transactions in Bitcoin, Guthrie believes that the prices are actually quite reasonable, even for cross-border transfers.
  5. Guthrie is also less concerned about Tether, believing any other stablecoin could replace this as the standard stablecoin on the Binance Exchange, especially one that has fewer questions about the credibility of its asset base.

Guthrie argued that rising cross-market correlations to really high levels makes a low-correlation asset like Bitcoin tremendously valuable from a portfolio diversification perspective.

Beyond the depreciation of fiat currencies, Guthrie sees the potential of blockchain to disrupt traditional financial assets like banks turning Bitcoin and other cryptos into a collector’s tool for disruptive technologies.

What you often hear in Bitcoin pitches is unbridled optimism. This was a balanced conversation about the pros and cons of the new asset class. You can listen to our full conversation below.

Important Risks Associated With This Item

* This article was written by a third party not affiliated with WisdomTree or any of its affiliates. No information contained in the material has been endorsed or approved by WisdomTree, and WisdomTree is not responsible for its content. Any information accessed through this material does not constitute a recommendation by WisdomTree to buy, sell, or hold any securities, financial products, or instruments discussed therein. This information is and should not be construed as an opinion as to the nature, potential, value, suitability or profitability of any particular investment or strategy. You are fully responsible for all investment decisions that you make and these decisions are made solely on the basis of those decisions based on your assessment of your financial situation, investment objectives, risk tolerance and liquidity needs.

Jason Guthrie works for WisdomTree Ireland Limited, a European subsidiary of the parent company WisdomTree Investments, Inc. of WisdomTree Asset Management Inc.

For definitions of the terms in the blog, see the glossary.