Szabo: 'Plenty of Upside' Left for Bitcoin

Nick Szabo, the cryptographer and computer scientist widely considered one of the intellectual fathers of Bitcoin, has come up with a bullish long-term $BTC take.

Despite the flagship cryptocurrency's recent underperformance relative to gold, Szabo argued that the market's ignorance is actually a bullish signal.

He has stated that there is "still plenty of upside" precisely because so few people understand the technology.

What's behind the divergence?

The commentary emerged from a debate on X (formerly Twitter) regarding the current "debasement trade." Some skeptics have questioned Bitcoin's narrative as "digital gold" now that it is dramatically underperforming the lustrous metal.

The discussion was sparked by user @Buhlaque, who expressed frustration with Bitcoin’s failure to act as a hedge.

"If gold and $BTC are going in opposite directions due to this debasement trade, what gives $BTC its value if it doesn't work as a hedge...?" the user asked. "I can't wrap my head around why $BTC works as a hedge against debasement long-term if when massive debasement happens short-term, gold goes up and $BTC goes down."

Szabo argued that Bitcoin cannot be judged solely as a mature hedge yet because its price is still a "learning curve" rather than pure monetary mechanics.

"Bitcoin is riding a learning curve, like a NASDAQ stock," Szabo wrote. "There are still plenty of people like you who haven't learned why Bitcoin in the long term works as a hedge against debasement. So there is still plenty of upside."

He argued that the majority of Bitcoin’s historical gains (from the infamous "pizza purchase" to today) were driven by early adopters realizing the value of this technology, not just by inflation.

"It's hard to tell that Bitcoin protects against debasement from just its price, since most of the price rise since the pizza purchase has been due to the learning curve, not to debasement (fiat has fallen, but not by nearly as much as Bitcoin has risen!)," Szabo explained.

He concluded with a dense, technical defense of why Bitcoin is superior to gold, asserting that the "upside" exists because most investors still do not grasp the engineering differences between the two assets.

"To understand why Bitcoin has and very likely will protect in the long-term against debasement, better than gold has and will, requires deep understanding of the underlying respective technologies that are gold and Bitcoin, especially in terms of their respective extents and qualities of trust minimization, and it requires knowing why trust minimization is valuable," Szabo wrote. "These kinds of understandings are still uncommon."