Caitlin Long on why Bitcoin’s scarcity is driving its rise into mainstream finance
The crypto landscape is advancing at breakneck speed, shifting from a niche interest to a mainstream financial topic.
This transformation is evident as political figures, like RFK Jr., and financial giants, such as BlackRock and Fidelity, are increasingly embracing the technology. In a recent discussion, Roundtable anchor, Rob Nelson, and Caitlin Long, Founder and CEO of Custodia Bank, delved into this significant shift and its implications for the future of crypto.
Nelson emphasized the significance of recent political endorsements and the increasing involvement of major financial players. This shift, according to Nelson, marks a pivotal moment in crypto’s journey.
Long, who has weathered multiple market cycles and previously worked on Wall Street with Morgan Stanley, points out that this isn’t the first time crypto has seen such heightened interest. She explains that these cycles tend to peak after the bitcoin halving, an event that reduces the inflation rate of bitcoin, making it a disinflationary asset. Long connects this phenomenon to the current bull market, which she believes is closely tied to the U.S. presidential election cycle.
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The discussion then pivots to the risks associated with leveraging assets like bitcoin. Long shares a cautionary note from her past debates, warning that “a fool and his leveraged bitcoin are soon parted.” She contrasts the scarcity of bitcoin with traditional assets, arguing that the drive to leverage bitcoin is rooted in an inflationary mindset. In her view, simply holding bitcoin, an asset with an ever-decreasing inflation rate, offers a natural hedge against inflation.
Nelson adds that many in the audience may not fully grasp the concept of leveraging in the crypto world. He likens it to practices in traditional finance but stresses that bitcoin’s unique characteristics make leveraging it particularly risky. Long supports this by explaining how bitcoin’s disinflationary nature, with its continually decreasing inflation rate, makes it fundamentally different from other assets like gold.
In essence, Long’s message is clear: Bitcoin’s scarcity and its role as a disinflationary asset should encourage holders to rethink the need for leverage. As the crypto space continues to develop, understanding these dynamics becomes crucial for both seasoned investors and newcomers alike.
