Bitcoin may be hailed as “digital gold” on Wall Street, but when a real crisis hits, many will treat the cryptocurrency like fantasy play money, says Tezos co-founder Arthur Breitman.
But why on earth would a crypto builder of almost a decade say such a thing?
What about all the institutional money pouring in, the billions flowing into spot Bitcoin ETFs and its narrative as a safe-haven asset?
Breitman says no matter how strong the narrative, there will always be a cohort of Bitcoin holders who will drop it when times get tough.
“If people are very uncertain about their economic future, the first thing they do is sell their funny internet money and their funny stocks,” the 40-year-old Frenchman, now based in London, tells Magazine.
“People might say it could be much more than funny internet money. Maybe so. But a lot of people own it on the basis that it is funny internet money; that’s how they see it.”
Bitcoin will always risk being a “momentum asset”
That doesn’t mean Breitman thinks Bitcoin’s a joke by any means; he’s just saying what many people won’t admit aloud… Not everyone can be truly won over by Bitcoin.
“What the market is maybe lacking is really long-term fundamental buyers of Bitcoin who will basically smooth out these momentum cycles,” Breitman says.
He points to the COVID-19 market crash in 2020, when Bitcoin’s price tanked in just days as investors fled amid global economic uncertainty.
“The risks are always there because it’s a momentum asset,” he says, explaining that more people tend to pile into Bitcoin when the price is rising.
Political uncertainty can have a similar effect. Fears around US President Donald Trump’s executive order imposing tariffs on goods from China, Canada and Mexico in early February saw Bitcoin tumble below $100,000 for the first time in six days.
In April, Coinpectra reported that numbers suggest Bitcoin is still perceived more as a speculative tech proxy and is yet to enter a new phase of market behavior.
Hype slowing down can also tip FOMO investors to panic. Breitman says:
“At some point, you run out of buyers, and then it stops going up, and people say, ‘Oh, my goodness. I thought I was buying an asset that goes up, and I was wrong. It’s an asset that doesn’t go up; I shall sell it.’”
“Then everyone does, and it goes down,” he says.
Breitman’s unapologetic calls likely come from his time in quantitative analysis at Goldman Sachs and Morgan Stanley, where you sink if you don’t speak up.
But don’t mistake Breitman for a stereotypical crypto bro with Lamborghinis and private jets.
“I can drive, but I don’t. First of all, I live in London,” says Breitman. “There’s not much sense for me to drive,” he laughs. Instead, Breitman leans into quieter passions.
“I enjoy classical singing, piano, opera and programming in my spare time,” Brietman says.
Bitcoin treasuries have risk for both the downside and upside
Breitman says one of the biggest risks for Bitcoin is the increasing number of companies adding it to their balance sheets.
“They have risk on the downside and risk on the upside,” Breitman says. Publicly traded Bitcoin treasuries hold roughly 984,971 BTC, worth approximately $110.97 billion at the time of publication, according to BitcoinTreasuries.NET.
“The risk on the downside is that if you have a market pullback, I think a lot of people will also pull back from ownership of these stocks; as they do so, their premium will collapse,” he says.
Breitman argues that the premiums propping up these Bitcoin treasury companies won’t last forever. He says companies will be forced into a tough decision if the stock trades below book value. Once they collapse, panic selling will follow.
“The natural thing to do would be to sell their assets and buy back their stock,” he says.
“I think there will be tremendous shareholder pressure to do that, which further creates a sales spiral. So, that’s a spiral you have on the downside. I think the premiums that those companies have are not sustainable,” he says.
Venture capital firm Breed recently echoed Breitman’s warning, predicting that only a few Bitcoin treasury companies will stand the test of time and avoid the vicious “death spiral” that will impact BTC holding companies that trade close to the NAV.
It was only in July when crypto analyst James Check said that his instinct is “the Bitcoin treasury strategy has a far shorter lifespan than most expect.”
Breitman says there is also risk on the upside, “paradoxically, because a lot of these companies have been financing themselves with convertible debt.”
“If you look at it — convertible debt — it’s a little bit like selling covered call options, in a sense of, like, if they do too well, then the debt converts into the assets and then the upside gets clipped,” Brietman says.
Breitman says it is a “damn shame” about Tezos’ ranking
Despite his controversial opinions about Bitcoin, Breitman is just as blunt about Tezos (XTZ), the native token of the open-source, self-upgradable blockchain platform he co-founded with his wife.
Once a top-10 cryptocurrency, Tezos has slid far down the rankings based on market capitalization, a reality that clearly frustrates him.
“Number 88 of the 100 is fucking damn shame,” Brietman says.
It’s not hard to see why. Tezos was once among the industry’s most promising projects, but now he watches as memecoins like Pepe, Dogecoin, Shiba Inu and FLOKI surpass it on the charts.
In 2021, Tezos reached an all-time high market cap of $7.2 billion. By the time of publication, it had shrunk to just $883 million, according to CoinMarketCap.
Thankfully, Tezos still manages to sit three spots above Fartcoin.
“At the end of the day, these things trade on sentiments,” Breitman says.
“Even when they have so-called protocol revenues, this is largely sensitive and hype-driven,” Breitman says.
However, Breitman says Tezos back in the top 20 would be a “good place to be now” as altcoins finally start to look promising again.
Ciaran Lyons
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