Bitcoin enters 2025 as an established form of money

2024 was a good year for Bitcoin. The leading cryptocurrency has risen by 126%, entering the world of big finance Spot ETFsIt has even reached the political arena, with a pro-crypto US president and several supportive members of Congress taking office in 2025.

These developments are not just a coincidence. It is the result of 16 years of steady progress in Bitcoin’s development, adoption, legal defense, and ongoing public discourse about the nature of money. Controversial monetary policies in recent years have also contributed to this success. Developed countries have realized that they are not immune to inflation (something the rest of the world knows well), and have recognized Bitcoin’s potential as a store of value.

Technological innovations have strengthened Bitcoin’s position. Improvements in payment systems have helped democratize and enhance its role as a means of payment.

Classical economic theory identifies the store of value and the means of exchange as the two basic functions of money. The third is the unit of account, and this is a role that Bitcoin has not yet fully fulfilled. Their current volatility – a typical characteristic for emerging assets – and limited adoption make this difficult. However, as adoption grows and Bitcoin’s value rises, Bitcoin’s volatility will likely decline, following the trend seen in other large, mature assets.

Throughout 2024, key metrics related to Bitcoin’s role as a store of value and medium of exchange have shown consistent growth, indicating increased adoption. In light of these trends, one could argue that Bitcoin will start 2025 in a confident position as a new form of money.

Bitcoin as a store of value

In April 2024, Bitcoin underwent a fourth halving, halving the miner’s reward and effectively reducing the inflation rate to just 0.85%. Compared to most fiat currencies, this alone makes Bitcoin stand out. Predictability, decreasing inflation, and increasing scarcity are rare in today’s financial system.

However, scarcity is not everything. Contrary to what some critics claim, Bitcoin is not backed by “nothing.” They are secured by large amounts of electricity that miners use to process transactions and create new coins. In 2024, Bitcoin’s hashrate rose from 520 million TH/s to 790 million TH/s, an all-time high, as shown by Blockchain.com. This represents an enormous computational effort, meaning that the entire Bitcoin mining network now produces 790 quadrillion (790,000,000,000,000,000) operations per second. To put this into perspective, DNA sequencing requires approximately a quadrillion operations. The Event Horizon Telescope network needed approximately 180,000 quadrillion operations to create an image of a black hole, an effort that took the team two years and 5 million CPU hours on high-performance computing clusters. Although the nature of these operations is different, this demonstrates the enormous power that supports Bitcoin.

Adopting Bitcoin as a store of value

It is very difficult, if not impossible, to know how many people own Bitcoin. However, as leading cryptocurrencies gain notoriety, more entities, such as public or private companies, are emerging as recognizable holders. Moreover, the launch of spot bitcoin ETFs in the US at the beginning of 2024 has accelerated the growth of bitcoin-backed funds, whose holdings can also be identified.

These entities increasing their Bitcoin holdings are a good indicator of the growing importance of Bitcoin as a store of value. according to BitcoinTreasuriesThe number of Bitcoins in corporate vaults rose by 31% in 2024, reaching 998,374 Bitcoins. This increase in corporate adoption has been facilitated by new guidelines issued by the US Financial Accounting Standards Board, which allowed companies to report cryptocurrency holdings at fair market value.

In 2024, the number of Bitcoin funds increased by 66% to 1,283,812 Bitcoin. New spot bitcoin ETFs played a major role in this progress, surpassing $123 billion in assets under management by the end of December, according to TheBlock.

This brings the total assets under management of all Bitcoin-backed ETFs to $129.2 billion. This number is very impressive considering that all gold ETFs currently manage $128.9 billion I mentioned Written by K33 Head of Research Vitel Lund.

At the government level, President-elect Donald Trump’s proposal to create a strategic reserve for Bitcoin could accelerate this trend, signaling a growing acceptance of Bitcoin as a store of value at the highest levels.

Bitcoin as a means of payment

The use of Bitcoin as a means of payment is also increasing, although blockchain technology is still fairly slow, with a capacity of only 7 transactions per second. This limitation is mitigated by the Lightning Network, a layer 2 solution built on top of Bitcoin. It can, in theory, reach millions of transactions per second, limited only by users’ network connections and the capacity of Lightning nodes. These nodes create off-chain binary channels, bypass Bitcoin’s on-chain restrictions, and only record transactions on the Bitcoin blockchain when funds are transferred to or from the Lightning Network.

This solution is also much cheaper than the main Bitcoin chain, with average fees of less than one cent compared to Bitcoin’s current average fee of $1.80. As a result, the accelerator network is also ideal for micropayments, establishing itself as a major payment method within the Bitcoin ecosystem.

Adopting Bitcoin as a means of payment

While BTC can be used on-chain for payments, the accelerator network is a more reliable measure of adoption. Not only is it better suited for payments, it also helps filter out speculative transaction spikes driven by Bitcoin-based projects like Ordinals or Runes.

according to TheBlockthe accelerated network capacity doubled from $227 million in January 2024 to $500 million by the end of the year.

The capacity of Lightning channels is not a direct indicator of how much BTC is circulating in the network – the exact number cannot be calculated. However, it does provide a good estimate of potential trading, assuming that Lightning nodes only lock funds in the network if they generate a reasonable return from payment fees.

The number of merchants accepting BTC is also on the rise. 1400 new sites added to BTCmap In 2024, bringing the total to 6,300 to 7,700 updated sites. Most merchants accept both on-chain and Lightning payments.

As Bitcoin advances, it serves as a reminder that money is not limited to fiat currencies. Thanks to its unique structure, mechanism and support, Bitcoin now serves as a store of value and a means of payment, which may add the role of a unit of account in the future. Sixteen years after its launch, Bitcoin is redefining traditional perceptions of money, offering an alternative to the modern monetary system.