Fidelity Analyst Explains Why Bitcoin Growth Has Slowed

Jurrien Timmer, Fidelity Investments’ Director of Global Macro, recently explained why Bitcoin adoption has slowed down. According to Timmer, the growth of Bitcoin's network has not kept pace with its price increases, causing this slowdown. He sees Bitcoin as “exponential gold” and a potential store of value, but highlights the need for network growth to sustain price movements.

Timmer points out that Bitcoin’s price is closely tied to its network growth, which is influenced by scarcity, monetary policies, and market sentiment. Despite rising prices, Bitcoin’s network growth has lagged, creating a gap that might explain the slowdown in adoption. Timmer compared Bitcoin and Ethereum’s growth to historical technological advancements, noting that Bitcoin’s network follows a power curve, with prices fluctuating around it, leading to a unique boom-bust cycle.

Timmer believes the gap between price and network growth could explain why Bitcoin’s adoption has slowed. He suggests that for Bitcoin to reach new highs, its network must grow faster. This could be driven by changes in fiscal policy. Veteran trader Peter Brandt noted diminishing returns in each bull market cycle, suggesting the current cycle might be ending. Timmer agreed, pointing to the nature of price discovery as Bitcoin matures.

Ki Young Ju, CEO of CryptoQuant, added insights on Bitcoin’s slower adoption. He noted that Bitcoin’s circulation velocity is at its lowest since 2013 but doesn't see this as negative. Ju argues that Bitcoin has shifted from being “P2P Electronic Cash” to “Digital Gold,” with institutions holding it long-term rather than frequently trading it. This shift means traditional adoption metrics may no longer apply. He suggested analyzing Bitcoin transactions differently to better understand its use.

Ju’s views align with the increasing interest from institutions in Bitcoin. For example, Canadian fintech company DeFi Technologies recently made Bitcoin its treasury reserve, buying 110 BTC. Similarly, Japanese firm Metaplanet adopted Bitcoin as its core reserve asset and added another 23.35 BTC in June, totaling 141.07 BTC.

Insights from experts like Timmer and Ju, along with rising institutional investments, highlight the gap between Bitcoin’s price and network growth. Despite slower adoption, the evolving uses of Bitcoin and growing institutional interest suggest Bitcoin’s future remains promising. As more institutions adopt Bitcoin as a reserve asset, its network growth and price dynamics may continue to evolve, leading to new developments in its adoption and market behavior.

In summary, Bitcoin adoption has slowed due to lagging network growth compared to price gains. However, this does not reduce Bitcoin’s potential as a key financial asset. With ongoing institutional interest and changing usage patterns, Bitcoin remains a significant player in the cryptocurrency world.