Why Lyn Alden Turned Bullish on Bitcoin in 2020 and Remains Optimistic

From Indifference to Optimism

In 2020, renowned investment strategist Lyn Alden made a decisive shift in her stance on Bitcoin (BTC). Having previously been “uninterested,” Alden revealed that she became “quite bullish” on Bitcoin following the cryptocurrency’s sharp drop below $3,600 in March.

This transition stemmed from a careful evaluation of Bitcoin’s fundamentals. Alden outlined three main reasons for her optimism: Bitcoin’s scarcity, the halving event, and its potential as an inflation hedge. Today, she continues to see BTC as a unique asset class with immense potential for long-term value.

Why Lyn Alden Became Bullish on Bitcoin

1. Scarcity: Bitcoin’s Deflationary Nature

One of the core attributes of Bitcoin is its fixed supply cap of 21 million coins. Unlike fiat currencies, which can be printed at will by central banks, Bitcoin operates on a deflationary model governed by its decentralized protocol.

Alden explained:

“Bitcoin’s protocol limits it to 21 million coins in total, which gives it scarcity, and therefore potentially gives it value… if there is demand for it.”

Why Scarcity Matters

• Finite Supply: The hard cap ensures that no additional Bitcoin can ever be created, making it a rare and finite resource.
• Independent Monetary Policy: Bitcoin is not controlled by central entities, protecting it from arbitrary monetary adjustments.

How Scarcity Drives Value

As demand for Bitcoin increases, its fixed supply inherently creates upward pressure on its price. Alden likened Bitcoin’s scarcity to gold, which derives its value partly from its limited availability.

“Bitcoin’s unique attributes, such as fungibility, transportability, immutability, and decentralization, make it a logical reserve of significance,” Alden noted.

2. Halving: The Supply Shock Catalyst

Bitcoin undergoes a halving event approximately every four years, reducing the number of new coins rewarded to miners by half. The most recent halving occurred in May 2020, cutting block rewards from 12.5 BTC to 6.25 BTC.

Impact of the Halving on Supply and Price

• Reduced Supply Growth: The halving decreases the rate at which new Bitcoin enters circulation, making it scarcer over time.
• Historical Precedents: Previous halvings in 2012 and 2016 preceded significant bull runs in Bitcoin’s price.

Alden’s Perspective on Halving

The halving creates a predictable supply shock that often coincides with increased demand. This dynamic strengthens Bitcoin’s deflationary characteristics, aligning it with Alden’s investment thesis.

3. Inflation Hedge: A Digital Store of Value

Bitcoin’s appeal as a hedge against inflation has grown in recent years, particularly amid concerns over expansionary monetary policies and unprecedented levels of government debt.

Bitcoin’s Role in Inflationary Environments

• Decentralized Alternative: Unlike fiat currencies, Bitcoin’s supply cannot be manipulated by central banks.
• Digital Gold: Bitcoin shares similarities with gold, including its role as a store of value during economic uncertainty.

Why Inflation Matters to Investors

Alden highlighted Bitcoin’s ability to act as a store of value during inflationary periods. With global governments resorting to quantitative easing to combat economic slowdowns, Bitcoin offers a compelling alternative to fiat currencies that are losing purchasing power.

“Bitcoin’s decentralized nature and scarcity position it as a strong candidate for investors seeking protection against inflation,” she noted.

Bitcoin’s Market Dominance and Liquidity Advantages

1. Leading the Cryptocurrency Market

Bitcoin remains the dominant force in the cryptocurrency space, accounting for 62.4% of the total market capitalization as of 2020. Its liquidity and market maturity distinguish it from other digital assets.

2. Stability Compared to Altcoins

• High Liquidity: Bitcoin is far more liquid than most altcoins, reducing price manipulation risks.
• Proven Security: Bitcoin’s robust network and long history make it a safer investment choice compared to newer, less-established projects.

Alden’s Take on Altcoins

While acknowledging the innovation within the altcoin ecosystem, Alden emphasized that many altcoins lack the maturity and stability of Bitcoin. This makes Bitcoin the preferred choice for institutional investors and those seeking a reliable store of value.

Bitcoin’s Resilience During Market Crises

1. The March 2020 Crash

During the March 2020 market crash, Bitcoin’s price plummeted to $3,600, driven by panic selling and macroeconomic uncertainty. Despite this sharp decline, Bitcoin quickly rebounded, showcasing its resilience.

2. Recovery and Growth

• Bitcoin’s recovery from its March lows demonstrated the market’s confidence in its fundamentals.
• Its performance highlighted its potential as a crisis-resistant asset, capable of weathering economic downturns.

Lyn Alden’s Balanced Approach to Bitcoin

Alden positions herself as neither a “perma-bull” nor a dismissive critic of Bitcoin. Instead, she takes a pragmatic approach, evaluating Bitcoin based on its fundamentals and market conditions.

She wrote:

“As an investor in many asset classes, these are the three main reasons I switched from uninterested to quite bullish on Bitcoin early this year, and remain so today.”

Future Outlook: Bitcoin’s Path Ahead

1. Increasing Institutional Adoption

The entry of institutional players like MicroStrategy, Square, and Grayscale has bolstered Bitcoin’s legitimacy as an investment asset.

2. Broader Use Cases

As Bitcoin continues to evolve, its potential applications in payments, remittances, and smart contracts could drive further adoption.

3. Challenges and Risks

• Regulatory Scrutiny: Governments worldwide are increasing oversight of cryptocurrencies.
• Volatility: Bitcoin’s price remains subject to significant fluctuations.

Conclusion: Why Bitcoin Still Holds Promise

Lyn Alden’s shift to a bullish stance on Bitcoin underscores its value proposition as a scarce, deflationary asset with significant potential as an inflation hedge.

While Bitcoin’s journey is not without challenges, its resilience, market dominance, and role as a store of value position it as a cornerstone of the cryptocurrency ecosystem. For investors seeking diversification and protection against macroeconomic risks, Bitcoin remains a compelling option.

For further insights into cryptocurrency trends and expert analyses, explore our article on latest news, where we delve into the factors shaping the digital asset landscape.