Bitcoin Health Rated A- By Lyn Alden: 5 Metrics That Make It 'Highly Investable'

Bitcoin's BTC/USD health received an A- from macro analyst and author of "Broken Money," Lyn Alden of Lyn Alden Investment Strategy.

She concluded the network is "highly investable, both in Bitcoin directly as an asset, and in the equity of companies building on top of the network," after assessing Bitcoin on the following five different metrics.

1. Market Capitalization And Liquidity

Price is an adoption metric that, according to Alden, "means something across several years."

Bitcoin is making higher highs and higher lows, a positive sign for the asset. Moreover, liquidity is increasing, leading to a positive network effect — the bigger the entities buying in, the more big entities can enter. 

Alden writes there is no quick fix for Bitcoin's volatility other than time, more adoption and more liquidity. 

But a better understanding of the network, user experience with Bitcoin wallets, exchanges and other applications will help the adoption process.

2. Bitcoin's Convertibility Is Increasing

Is Bitcoin a medium of exchange or a store of value?

Both, says Alden: "It’s that blend of both payments and savings that is important."

Bitcoin's main strength is its optionality because it "can’t be unilaterally frozen or debased by any bank or government with a stroke of a pen." At the same time, its limited supply makes it the harder money compared to the dollar — hence why people hoard it.

Bitcoin also scores well for convertibility. As Alden puts it: "If I bring Bitcoin with me, could I spend or convert it for value without much hassle?" In most urban centers, the answer is yes.

Finally, while still in their infancy, Bitcoin hubs where you can transact entirely in Bitcoin are springing up around the world.

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3. Bitcoin Is "Lindy"

The longer a technology or an idea has been around, the longer their future life expectancy, according to the Lindy effect.

Alden says Bitcoin checks the box on this, with its 100% uptime since 2013.

Its nodes are more widely distributed than those of Ethereum and Bitcoin miners can easily switch between mining pools, even though centralization is somewhat of a problem. 

The biggest centralization bottleneck for Bitcoin: chips. The network suffers from the same dependency on chips from Taiwan as many other industries.

4. User Experience Becoming "More Intuitive"

Very few average investors use the actual Bitcoin network, let alone apps on it.

But Alden sees continuing improvements on that front, with a rising number of Bitcoin ATMs, more intuitive hardware and software and communication protocols. 

That will continue, "from what I see in the development pipeline as a venture investor."

5. Bitcoin Cannot Be Banned

Alden's answer to whether Bitcoin can be banned: "Bitcoin is free open-source code, which makes it hard to stamp out."

She notes countries have "flip-flopped" on this, citing China's failed mining ban and Nigeria's 180 on cryptocurrencies.

Bitcoin and stablecoins penetrate the financial borders limiting entry of foreign capital — while fiat currencies can be stopped by custodians, cryptocurrencies can not.

The biggest regulatory challenge for Bitcoin will be around financial privacy. Alden expects the "centralized surveillance apparatus" to fight against pseudonymous value transfer.

Alden's Final Verdict: Alden rates the network A-.

She notes that she would only be concerned "if the Bitcoin price were to stagnate despite a prolonged period of rising global liquidity, or if Bitcoin were to fail to keep making higher highs and higher lows over a multi-year timeframe despite global liquidity doing so." 

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