To access the services provided by Bitcoin, the only way is to purchase the asset itself.

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: Saoirse, Foresight News

This week, I temporarily set aside my usual market commentary to share some macro thoughts on Bitcoin. I am not worried about the current market pullback; in my view, this pullback is essentially a short-term phenomenon.

Every year, I meet with thousands of financial advisors to discuss topics related to Bitcoin. In every presentation, I start by answering a simple question:

What exactly gives Bitcoin its value?

It does not generate profits, does not produce cash flow, and cannot even be touched! How can its market value reach $2 trillion?

Here is one way I think about this question.

Bitcoin is a Service

In my view, Bitcoin should not be seen as a "thing," but rather as a "service."

The service provided by Bitcoin is to allow users to store wealth digitally without relying on governments, banks, or other third-party institutions. I prefer to redefine Bitcoin as a "service" because I find that many people get hung up on the fact that "it cannot be touched" —

"Are you really asking me to spend $90,000 on something I can't touch?!"

But if we reinterpret it as a service, this confusion is resolved. Moreover, we are all already accustomed to the logic that "services have value."

Take Microsoft as an example; the services provided by Microsoft include editing Word documents, processing spreadsheets, and conducting Teams video meetings. As I write this memo, I am using Microsoft's services.

To use Microsoft's services, I need to subscribe to Microsoft 365. Every year, I pay Microsoft $99.95. The team in Redmond, Washington, collects this fee, and the related profits ultimately contribute to Microsoft's net profit in its financial reports.

An obvious fact is that the value of Microsoft stock is closely related to the number of users wanting to use its services. All else being equal, the more users need Microsoft's services, the higher the company's value; if the number of users needing its services decreases, the company's value will decline; if no one needs its services, the company's value will drop to zero.

The logic of Bitcoin is similar: the more users need the service provided by Bitcoin, the higher its value; if the number of users needing the service decreases, its value will decline; if no one needs this service, its value will also drop to zero.

Over the past decade, the price of Bitcoin has increased by about 28,000%, primarily because more and more people want to store digital wealth "without going through a company or government intermediary" — in other words, they need the service provided by Bitcoin. Today, not only does the Harvard Alumni Fund need this service, but the Abu Dhabi Sovereign Wealth Fund, Ray Dalio, Stan Druckenmiller, various state pension funds, and I myself are all using this service.

However, there is a key difference between Bitcoin and Microsoft: Bitcoin does not have a corresponding "corporate entity" that can collect fees, and users cannot access its services through "subscriptions" or "rentals." The only way to access the services provided by Bitcoin is to purchase the asset itself.

In this increasingly digital age, as government debts continue to accumulate, I believe more people will need the service provided by Bitcoin in the future.

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