Bitcoin 'Going Up Forever' - Stablecoins Might Become A Strong Competitor


  • According to the CEO of MicroStrategy, Bitcoin is "going up forever."
  • This is a bold statement, and in this article, I will try to analyze on which assumptions this statement is likely based, and if it could theoretically be true.
  • He also mentioned that he believes stablecoins might become a big success, but won't stablecoins compete with Bitcoin heavily?
  • I believe that the current success of stablecoins could be a warning signal for investors in Bitcoin.

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Michael Saylor, the CEO of MicroStrategy (MSTR), recently said that Bitcoin (BTC-USD) is "going up forever." Though he added that Bitcoin investors will likely have to endure volatility, this is a bold statement. Also, he said he thinks that stablecoins can become a big success. Is there any possibility that he might be right in his predictions? And will stablecoins become a strong competitor for Bitcoin?

Of course, Mr. Saylor is speaking to his book, as MicroStrategy is acquiring Bitcoin and aims to hold it. So it is only logical that he is very enthusiastic about Bitcoin and cryptocurrency. But let us look a bit deeper into his statement and his further remarks about stablecoins.

Forever is long, very long

Ok, let us not take his words too literally. Bitcoin will not outlive our galaxy, solar system, and probably not our Earth either. What I believe Saylor meant to say is that Bitcoin has emerged as a store of value and will continue to grow. Like the stock markets (which have gone up tremendously in the long term), Bitcoin will be an investment that is only going up eventually. Or so he says.

Take a look below at the longest chart I could find on YCharts of the Dow Jones Industrial Average (DIA). In the long term, the bear markets between 1930 and now seem like blips on the radar. Over the years, there has been only one direction: up.

Data by YCharts

Graph: Dow Jones Industrial Average over the years (Source: YCharts)


There is one big problem which Bitcoin skeptics often stress: while stocks are pieces of ownership of companies, Bitcoin does not produce anything. It makes zero profits, it does not have revenue, it does not pay dividends. Bitcoin's price appreciation only depends on other people paying a higher price for it in the future.

In my humble opinion, Bitcoin does "produce" value. First of all, it acts as a store of value. Second of all, it enables and facilitates financial transactions across the globe. Lots of words have already been written about it, but Bitcoin has basically become the digital gold.

Stablecoins: complementary or substitutes?

There is another interesting topic which Mr. Saylor mentioned: stablecoins. He sees a "U.S. dollar stablecoin going to a market cap of $10T if regulators provide a transparent structure around it." Also, he said that "the U.S. dollar would likely emerge as the world reserve digital currency".

Stablecoins are a very interesting topic. On the one hand, they can be a safe, less-volatile asset that still has many of the benefits of cryptocurrency. On the other hand, it is feared that stablecoins could be subjected to rules which make their usefulness limited.

If stablecoins become very successful, it is a big question whether this will be good or bad news for other cryptocurrencies. In other words, will stablecoins be complementary or substitutes for Bitcoin? I think the answer to this question is very important when assessing the future of Bitcoin.

Since Mr. Saylor is a strong believer in both stablecoins and Bitcoin, it logically follows that he thinks the two are complementary. But let us consider the following: When stablecoins become a success, the benefit of using Bitcoin becomes smaller. In financial transactions, stablecoins will probably be equivalent if not better. As a store of value, Bitcoin might still appeal to investors more, since it is decoupled from the "fiat" money system. But I think Bitcoin could lose some of its shine when stablecoins become big.

A warning sign

Stablecoins have been growing in market capitalization lately. Here you can find a nice list of stablecoins and their current market cap. Currently, Tether is the largest stablecoin measured by market cap. As you can see in this graph, its market capitalization has skyrocketed from less than $5B at the beginning of 2020 to more than $70B right now. And there is no sign that this is slowing. As already highlighted by some other Seeking Alpha contributors, Tether has been accused of being a particularly sketchy business, but this has not stopped it from gaining market share.

If a true trustworthy stablecoin would emerge, likely regulated like banks and other financial institutions, this could be a very strong competitor for Bitcoin, or at least on the side of payment possibilities. By its very definition, a stablecoin would be linked to a fiat currency, and the whole point of Bitcoin is that it is not linked to this, so it will have to be seen whether investors like stablecoins or Bitcoin more as their store of value of choice.

Let us take a brief look at the price development of gold (GLD). Though it has some industrial use, gold is mostly used as a store of value.

Data by YCharts

Graph: Gold Price over the years (Source: YCharts)

Gold returned an average of 10.6% between 1971 and 2019, which is a decent return but slightly worse than stocks and commodities. This return is in no way near the stratospheric price predictions which are sometimes made about Bitcoin. It is also not close to the price development of Bitcoin over the last couple of years.

Bitcoin does have some benefits which theoretically make it a more robust investment than gold, like no (or low) storage costs and easy transferability. But maybe similar-looking price developments will be what we should expect when Bitcoin becomes solely a store of value?


Forever is long, and by saying that Bitcoin will go up forever, I believe the CEO of MicroStrategy was merely implying that the long-term price development of Bitcoin will be very positive. Though price increases of Bitcoin depend on future buyers paying more for it than current buyers, Bitcoin does have added value in financial transaction possibilities and a unique store of value.

Stablecoins can also provide smooth financial transactions while experiencing no volatility when measured against fiat currency. This might narrow the investment thesis for Bitcoin to only a store of value, albeit a very robust one.

I believe that the success of stablecoins is a warning sign for Bitcoin holders since it will reduce Bitcoin to a pure store of value. As a reference for what kind of average returns to expect in the long term for pure stores of value, we can look at gold, which has returned an average of 10.6% between 1971 and 2019. The fact that most current stablecoins are accused of having questionable business structures adds to this warning sign since a truly trustworthy and regulated stablecoin will have even more impact.

Thank you for reading! Please let me know in the comment section what you think about Bitcoin and the impact of stablecoins on its use!

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