Caitlin Long on why bitcoin’s scarcity is driving its rise into mainstream finance

The world of cryptocurrencies is advancing at a dizzying pace, transforming from a niche interest to a mainstream financial topic.

This transformation is evident as political figures like RFK Jr. and financial giants like BlackRock and Fidelity increasingly embrace the technology. In a recent discussion, Roundtable host Rob Nelson and Custodia Bank Founder and CEO Caitlin Long delved into this significant shift and its implications for the future of crypto.

Nelson highlighted the importance of recent political support and the growing involvement of major financial players, which Nelson said marks a significant moment in crypto’s journey.

Having weathered many market cycles and previously working on Wall Street with Morgan Stanley, Long notes that this is not the first time cryptocurrencies have seen such high interest. He explains that these cycles tend to peak after bitcoin’s halving, an event that lowers bitcoin’s inflation rate and makes it a disinflationary asset. Long attributes this phenomenon to the current bull market, which he believes is closely tied to the US presidential election cycle.

The discussion then turns to the risks that come with leveraging assets like bitcoin. Long shares a cautionary note from past discussions, warning that “dumb and leveraged bitcoin will soon be gone.” He compares bitcoin’s scarcity to traditional assets and argues that the drive to leverage bitcoin stems from an inflationary mindset. Holding bitcoin, an asset with a constantly decreasing inflation rate, provides a natural hedge against inflation, he says.

Nelson adds that many in the audience may not fully grasp the concept of leverage in the crypto world. He likens it to traditional finance practices, but stresses that bitcoin’s unique properties make using leverage particularly risky. Long supports this by explaining how bitcoin’s disinflationary nature, with its ever-decreasing inflation rate, makes it fundamentally different from other assets like gold.

At its core, Long’s message is clear: Bitcoin’s scarcity and role as an inflation-reducing asset should prompt holders to rethink the need for leverage. As the crypto space continues to evolve, understanding these dynamics is vital for both seasoned investors and beginners.