Bitwise CIO: I'm not worried about the market pullback. Think about why BTC is valuable.

Source: Matt Hougan, Chief Investment Officer of Bitwise; Translated by Golden Finance

Author's note: I temporarily set aside daily market commentary to share some macro views on Bitcoin. I am not worried about the current market correction; I believe it is just a short-term phenomenon. I will resume market-related commentary next week.

Every year, I meet with thousands of financial advisors to discuss Bitcoin. I start each of my speeches by answering a simple question:

What exactly gives Bitcoin its value?

It generates neither profit nor cash flow. You can't even touch it! How can it possibly be worth 2 trillion dollars?

Here is one way I would answer this question.

Bitcoin is a service

I do not see Bitcoin as an object, but as a service.

The service provided by Bitcoin is that it allows people to store wealth in digital form without relying on governments, banks, or other third parties. The reason I like to redefine Bitcoin as a “service” is that I believe people are too caught up in the fact that it cannot be physically touched.

You want me to spend $90,000 on something I can't even touch?!

If we redefine it as a service, this problem will be easily resolved. Moreover, we are all accustomed to services having value.

Taking Microsoft as an example. Microsoft offers a service: editing Word documents, handling spreadsheets, hosting Teams meetings, and so on. I am using this service to edit this memo.

I use Microsoft's services by subscribing to Microsoft 365. Every year I pay Microsoft $99.95. Someone located in Redmond, Washington collects this fee, and the profit goes directly into Microsoft's profit pool.

It is evident that the value of Microsoft stock is closely related to the demand for its services. All else being equal, the higher the demand, the greater the value of Microsoft. If demand decreases, the company's value will decline. If no one needs Microsoft's services, its value will be zero.

The same goes for Bitcoin. The more people need Bitcoin services, the higher its value; if fewer people need it, its value will decrease; if no one needs Bitcoin services, its value will be zero.

The reason Bitcoin's price has risen by about 28,000% over the past decade is that more and more people wish to store digital wealth in a way that does not require the intervention of companies or governments. In other words, they need the services of Bitcoin. Today, Harvard University's endowment fund needs this service; the Abu Dhabi sovereign wealth fund also needs it; Ray Dalio, Stan Druckenmiller, national pension funds, and I myself also need it.

The difference between Bitcoin and Microsoft is that Bitcoin does not require payment to any company. You cannot subscribe to or rent services for Bitcoin. The only way to obtain this service is to purchase Bitcoin as an asset.

In our increasingly digital age, as government debt continues to accumulate in various countries, I suspect that more people will need this service in the future.