Throughout its relatively short history, there have been countless discussions attempting to figure out the best way of valuing Bitcoin (BTC).
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Many perceive it as a hedge against the global financial system – a view that makes sense, given Bitcoin came into being following the 2008 financial crisis. With the expanding USD money supply and rising inflation, Bitcoin is often seen as a safe haven asset.
However, in top investor PropNotes’ view, BTC is “really, ultimately, a replacement for Gold in the modern era.”
That has become a common narrative, with Bitcoin often dubbed “digital gold.” It’s a logical description as Bitcoin boasts some of gold’s key characteristics: its supply is limited, it is not issued by any specific government, and it functions as a store of “excess liquidity created by the mainstream financial system.” Unlike gold, however, PropNotes thinks Bitcoin overcomes some significant drawbacks, such as high storage costs, challenges with transportation, and the environmental harm caused by physical mining, although given BTC’s notorious energy consumption, the last point might not actually stand up that well under scrutiny.
Nevertheless, the key, says PropNotes, is that BTC ‘works’. “As a neutral, public, monetary backbone for the internet age, BTC demand is driven by the inherent value of the network’s functionality,” the 5-star investor explained.
Given how Bitcoin’s value has increased dramatically throughout its life span, it’s clear there has been plenty of demand for it. That said, with 2025 now upon us, there are “monetary headwinds” emerging that could impact Bitcoin’s trajectory.
First, as it unwinds its balance sheet, the Fed continues its policy of tightening liquidity. Additionally, due to worse-than-expected inflation data combined with stronger-than-anticipated employment figures, the Fed’s easing cycle now faces uncertainty. If the Fed ends up cutting interest rates less than Bitcoin investors had anticipated in 2024, this could undermine the “excess liquidity” narrative the bull case has been built on, potentially driving its price lower.
However, on the plus side, Bitcoin continues to benefit from a gradual, long-term trend of replacing gold as the preferred global store of value. This secular shift provides a consistent underlying demand for BTC.
Moreover, gold still has a significantly bigger market cap than Bitcoin – about 10 times larger – suggesting there’s substantial potential upside for BTC as it narrows the gap, even if this transition is unlikely to happen overnight. “Additionally,” says the investor, “BTC has historically been a trendy asset, and we’re still clearly in the throes of an uptrend.” On balance, then, the outlook for 2025 is somewhat mixed.
But PropNotes has a way to make use of this scenario. “All in all, we think BTC will keep trending higher, at least until the monetary situation potentially resolves to the downside,” the investor explained. “In the event that does happen, protecting a long position with a trailing stop loss seems like the best way to trade Bitcoin in what otherwise looks to be a tough-to-predict year.”
Bottom line, PropNotes currently rates Bitcoin a Hold (i.e. Neutral). (To watch PropNotes’ track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
