Ark Invest’s Report Makes The Case That Bitcoin Is The Most Compelling Monetary Asset Since Gold
Cathie Woods’ ARK Invest is widely recognized as the first, and most thoughtful, institutional investor in Bitcoin. Her first Bitcoin analyst, Chris Burniske, went on to write the seminal book in valuing cryptocurrency, and start his own crypto Fund, Placeholder . Chris was followed at Ark by Yassine Elamndjra, another highly talented crypto analyst.
On September 3rd, Yassine/Ark, in partnership with Coin Metrics, published a thoughtful 20 page report, “Bitcoin: A Novel Economic Institution”, that is well worth the read. My five highlights are below.
1. Trust Based Models Fall Short
While the full ramifications of Bitcoin’s creation are not well understood, we believe that it will contribute more dramatically and profoundly to the evolution of monetary and financial systems than any other breakthrough in history.
The report notes that, to date, society has functioned via “trust-based” models, where the integrity of the institutions is simply a function of those controlling the institution. But time and again, those trust based models have fallen short, and Bitcoin solves for that.
2. Since 2007, The Number Of Central Banks Increasing Capital Controls Has Tripled, While Those Relaxing Controls Fell 60%
Instead of letting capitalism do it’s thing, subjecting local banks and markets to competitive pressures, governments are increasingly forcing citizens to misallocate capital, curbing productivity, investment efficiency, and economic growth.
3. In The Last Century, Three Monetary Policy Changes Cut The Purchasing Power Of Almost Half Of The World’s Currencies By 50%:
Could the Fed’s recent response to the coronavirus pandemic have similar consequences?
4. Since 1995 The Average Bank Reserve Requirement Globally Has Dropped By Nearly 80%
Remarkably, in response to COVID-19, the Fed reduced the reserve requirement ratio to zero across all deposit tiers, effective March 26, 2020. This aim of this reduction was to jump-start the economy by allowing banks to use additional liquidity to lend to individuals and businesses.
5. Bitcoin Is Designed to Satisfy Four Key Economic Assurances
The report focused on showing how Bitcoin was designed to create an ecosystem that provided four key economic assurances that traditional trust based systems fail to provide:
Value should be exchanged globally and freely.
Wealth should be owned wholly and protected.
Rules should be enforced reliably and predictably.
Integrity of the system should be verifiable
Arguably, Bitcoin’s most valuable feature is its reliable monetary policy, as arbitrary changes are highly improbable.
The first part of the report ends by stating:
While many investors question its merit, in our view bitcoin is the most compelling monetary asset to emerge since gold.
Part 2 of Ark’s Bitcoin research piece, to be published here on September 10th, will look at bitcoin as an emerging monetary asset.