The flip side of adoption

How bitcoin’s institutionalisation has called decentralisation into question

Since bitcoin began to attract a broad audience, attempts have been made to fit it into investors’ familiar frame of reference by likening it to the very assets it was meant to replace.

The dominant story in recent years has been “digital gold”. The first cryptocurrency was cast as a safe haven, a hedge against inflation and the instability of fiat money. The latest bear market showed that bitcoin could not sustain that role; now parts of the community tout it as a would‑be global reserve currency.

ForkLog set out to examine why a digital asset is continually assigned new roles—and where this might lead.

There is only one gold

Bitcoin emerged as a technological and political reaction to the fiat monetary order: centralised issuance, dependence on states and banks, and asymmetric access to money. As the cryptocurrency drew capital and moved beyond a narrow circle of enthusiasts, it was inevitably pulled into traditional finance.

Safe haven and store of value are social roles shaped over decades, even centuries. Once these labels are pinned on bitcoin, investors expect matching behaviour: stability, predictability in crises and an inverse relationship with market risk. If earlier it could at times live up to such expectations, today the “digital gold” narrative is collapsing.

This has less to do with bitcoin itself than with the place it has assumed in traditional finance. Looking back, a pivotal step was recognition by TradFi. The launch of the first spot ETF, and companies—public and otherwise—adding the coin to their reserves, were widely seen as signs of maturity.

Over time it became clear that institutional investors are not always a blessing. Analysts at Deutsche Bank acknowledged that as the share of big capital shrinks, trading volumes fall, leaving bitcoin more vulnerable to sharp price swings.

The first cryptocurrency has thus shifted from anti‑systemic asset to familiar financial instrument, with ETFs the culmination of that process. Bitcoin has been drawn into the very mechanisms it was meant to guard against: liquidity tides, margin sell‑offs and sensitivity to external shocks.

The market dynamics bear this out. Where gold and bitcoin once moved together, that link, for the first time since 2022, fell to zero. As the metal set record highs, bitcoin’s performance was muted—and then it plunged, dragging the rest of the market with it.

As the old narrative unravels, the market has searched for another. The same media figures and influencers who recently sold the “digital gold” idea now pitch bitcoin as a global reserve currency.

What is the point?

The move from digital gold to reserve currency is telling. It speaks less to bitcoin’s transformation than to an effort to preserve its place in the financial pecking order.

A reserve currency underpins global financial infrastructure. International trade, debt markets, credit and more are built around it. Such status presumes resilience and robustness—qualities bitcoin, however desirable, does not possess.

Talk of replacing the dollar as the reserve currency has grown amid political and economic instability in the United States. An imminent change at the helm of the Fed, the fallout from trade wars, escalating international conflicts and domestic turbulence are eroding confidence in America’s currency. Around the world, statements about plans to reduce or abandon it in trade settlements are heard more often; for some countries the dollar is becoming a toxic instrument.

But a weaker dollar does not magically produce an alternative. Reserve currencies arise from infrastructural, political and economic dominance. It is precisely here that the crypto community seeks to dress bitcoin in a new, more prestigious role.

If the digital‑gold idea still allowed debate, the pitch for a world reserve currency does not withstand scrutiny. Proponents overlook bitcoin’s chief virtue: a fixed supply. To serve global payments and reserves, an asset must be available in sufficient quantity.

At a price of $69,100, the combined value of all possible 21m BTC is about $1.4trn. That is in no way commensurate with the scale of the world economy and international financial markets.

Moreover, a capped supply makes the asset deflationary, encouraging hoarding rather than circulation—at odds with the logic of a reserve currency. Even if, hypothetically, the community removed the issuance limit, it would strip the first cryptocurrency of its key property: trust in unchanging rules. Such arguments are especially paradoxical when voiced by industry leaders.

Bitcoin was created as an alternative to the fiat system, not its new pillar. By assigning it functions that demand stability and institutional governance, the industry risks eroding the very meaning of decentralisation.

The cost of adoption

In the white paper, bitcoin was described first and foremost as a decentralised payment system enabling value to move directly, without banks or intermediaries. A currency beyond external control, open to any network user.

In its current form, however, bitcoin is no longer outside the system. It now channels institutional capital flows and reacts to the same liquidity and risk signals as other financial instruments. The community itself played the leading role in this shift, consistently trying to fit bitcoin into the very system it was built to oppose.

A return to bitcoin’s decentralised origins is no longer possible. Nor does it belong squarely to TradFi. It sits in an in‑between state: too decentralised to be a stable currency and too institutionalised to remain an anti‑system instrument.

As the flagship of the crypto market, its evolution matters as precedent. Other digital assets will follow (and some already do) the same path to acceptance—through institutionalisation, regulation and adaptation for the mass user.

The industry’s best course may be to stop searching for meanings for bitcoin and leave that to Wall Street. Instead it should answer a harder question: if mass adoption erodes the decentralised financial world as Satoshi Nakamoto imagined it, are cryptocurrencies an alternative to the existing financial system at all—or merely its more technological and profitable instrument?

Text: Alisa Ditz