- He said Bitcoin has a "structural failing" because it can't serve as a reserve asset for central banks.
- The investor also noted that Bitcoin will likely remain an asset held mostly through ETFs and private portfolios rather than by government institutions because it runs on a public ledger that anyone can see.
- Palihapitiya said that stablecoins are a "structural innovation" that makes payments easier and helps expand global transaction rails.
Chamath Palihapitiya, a billionaire investor and CEO of Social Capital, said that Bitcoin fails on two dimensions that could make it harder for central banks to use it in the long term.
The investor told Zerodha co-founder Nikhil Kamath in an interview that for a crypto asset to be widely used at the national level, it needs features that allow central banks to hold it as part of their reserves. “There’s a structural failing in Bitcoin,” he said.
“One is fungibility, and two is privacy. And so Bitcoin fails on those two dimensions,” he said, arguing that the limitations could prevent the cryptocurrency from becoming “a structural holding of a central bank.”
Palihapitiya said that Bitcoin's public ledger is hard to keep private because it is viewable by everyone. Because of this, he said that Bitcoin will probably stay an asset that investors hold through ETFs and private portfolios, and will not be held as a reserve asset by central banks.
Bitcoin (BTC) was trading at $72,762 on Wednesday morning, up over 8% in the last 24 hours. On Stocktwits, retail sentiment around BTC improved from ‘bullish’ to ‘extremely bullish’ zone over the past day, as chatter levels remained at ‘low’ over the past day.
Stablecoins Reduce Payment Friction
The venture capitalist noted that other parts of the crypto ecosystem still look promising. He called stablecoins a "structural innovation" that makes payments easier and could help people do business around the world. He also said that stablecoins reduce “friction and allow transaction rails to proliferate,” making them useful for improving the efficiency of global payments.
Chamath Palihapitiya has been a well-known figure in the crypto world for years. He was one of the first people to buy Bitcoin, reportedly acquiring it when it was worth about $80. He has called Bitcoin "gold 2.0" over the years and said it could protect against inflation and unstable money.
During the boom in Special Purpose Acquisition Companies (SPACs) from 2020 to 2021, Palihapitiya became known as the "SPAC King." Through his company, Social Capital, he started and funded several high-profile SPAC deals that made companies like Virgin Galactic, Opendoor, Clover Health, and SoFi public.
Read also: Morgan Stanley Chooses Coinbase And BNY Mellon For Its Bitcoin ETF
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