Grayscale Economist Says Bitcoin Is a Dollar Rival

Grayscale was one of the firms spearheading the January debut of the first U.S.-listed spot bitcoin ETFs, which was the culmination of years of wrangling with the SEC and its concerns. The Grayscale Bitcoin Trust debuted in 2013, more than a decade before its conversion into an ETF. Today, the Grayscale Bitcoin Trust (GBTC) has roughly $25 billion in assets under management. VettaFi spoke recently with economist Zach Pandl, Grayscale's head of research, about the recent runup in bitcoin's price and what lies ahead for the cryptocurrency, among other topics.

Two Major Drivers for Bitcoin Performance

Bitcoin has been on fire lately. What is the best kind of environment to support bitcoin's performance, and are we in it now?

There's always two trends that are driving bitcoin’s price. One is macro factors. Bitcoin is a macro asset. It is a store of value that competes with the dollar, and it competes with physical gold for that role.

The kinds of things that drive demand for these types of assets — for stores of value —those types of episodes are good for Bitcoin. [The reason for that is] Bitcoin competes with the dollar. If Federal Reserve rate cuts, that can be something that weighs on the dollar, that make the dollar a little bit less attractive. [That’s] good for competitors to the dollar like gold, like Bitcoin, like other currencies. I think [expected] Federal Reserve rate cuts are a positive for bitcoin’s valuation, for crypto valuation and are something that has been driving the market over the last two quarters, since the Fed pivoted and turned its attention towards rate cuts from rate hikes last year.

The second big trend is going to be the technological developments that are happening in crypto. Bitcoin is a macro asset, but ultimately this public blockchain tech technology is about innovation, a new type of digital infrastructure and all the things that can be done with that. Bitcoin is just one part of the story.

We'll be watching for the technological [developments] as well. One example would be that the ethereum network — the second biggest blockchain and the second biggest asset in crypto markets — is going through an upgrade this month. That's the kind of technological advancement that can take Bitcoin and crypto forward.