Bitcoin Matures as a Recognized Monetary Form by 2025
2024 saw Bitcoin soar, with a staggering 126% surge. This year marked a major milestone in Bitcoin's journey, as it made its way into the realm of big finance with the introduction of spot ETFs. The political arena also got a taste of Bitcoin, thanks to a pro-crypto president and supportive Congress members taking office in 2025.
This wave of success wasn't a fluke. It was the culmination of 16 years of progress in Bitcoin's development, adoption, legal advocacy, and public discourse about money. Controversial monetary policies and the realization of developed countries' vulnerability to inflation further fueled Bitcoin's ascent.
Technological advancements have been instrumental in reinforcing Bitcoin's position. Improvements in payment systems have democratized Bitcoin, promoting its role as a means of payment.
According to classical economic theory, money has three primary functions: a store of value, a means of exchange, and a unit of account. Bitcoin has proven its worth as a store of value and a means of exchange. Its predictability, diminishing inflation, and scarcity set it apart from most fiat currencies.
However, Bitcoin's volatility and limited adoption have made it challenging to fully realize its role as a unit of account. As adoption increases and Bitcoin's value appreciates, this volatility is expected to decline, following the trend seen in other mature assets.
Throughout 2024, key metrics related to Bitcoin's role as a store of value and medium of exchange showed consistent growth, signaling increasing adoption. This trend suggests that Bitcoin enters 2025 confidently positioned as a new form of money.
Bitcoin as a Store of Value
April 2024 saw Bitcoin's 4th halving, reducing the miner's reward by half and effectively halving its inflation rate to 0.85%. The predictability, diminishing inflation, and increasing scarcity of Bitcoin set it apart from most fiat currencies.
Far from being backed by "nothing," Bitcoin is secured by the immense computational effort of miners. In 2024, Bitcoin's hashrate grew from 520 million TH/s to 790 million TH/s, a significant leap that represented a colossal computational effort.
Bitcoin Adoption as a Store of Value
While counting the number of Bitcoin holders is tricky, the launch of spot Bitcoin ETFs in the US at the beginning of 2024 accelerated the growth of Bitcoin-backed funds. This in turn increased corporate adoption, as companies like MicroStrategy expanded their Bitcoin holdings.
The U.S. Financial Accounting Standards Board's new guidelines allowed companies to report crypto holdings at fair market value, facilitating this trend. By the end of 2024, the number of BTC in corporate treasuries had surged by 31%.
The number of BTC in funds grew by 66% in 2024, reaching 1,283,812 BTC. This growth was driven by the new spot Bitcoin ETFs, which exceeded $123 billion in assets under management by the end of the year.
At the government level, President-elect Donald Trump's proposal to create a Strategic Bitcoin Reserve could further accelerate this trend, signaling a growing acceptance of Bitcoin as a store of value at the highest levels.
Bitcoin as a Means of Payment
While Bitcoin's blockchain remains relatively slow, the Lightning Network, a layer-2 solution built on top of Bitcoin, can handle millions of transactions per second. This makes it an ideal solution for micropayments.
The Lightning Network capacity doubled from $227 million to $500 million by the end of 2024. The number of merchants accepting Bitcoin also increased by 1,400 in 2024, reaching 7,700 up-to-date locations.
As Bitcoin evolves, it serves as a reminder that money isn't confined to fiat currencies. With its unique structure, mechanism, and backing, Bitcoin now serves as a store of value and a means of payment, potentially adding the unit of account role in the future. Sixteen years after its launch, Bitcoin redefines conventional perceptions of money, offering an alternative to the modern monetary system.
In 2025, with the pro-crypto president and supportive Congress members in office, discussions about incorporating Bitcoin as a legal tender for transactional purposes within the country's monetary system began. This move was largely influenced by Bitcoin's growing popularity as a store of value and its increasing use in various industries due to the advancements in the Lightning Network.
The increasing usage of Bitcoin ETFs as a form of investment further solidified Bitcoin's position as a legitimate digital currency. Assets under management in these ETFs surpassed $150 billion, making Bitcoin a credible alternative to traditional investment options like stocks and bonds.
