Bitcoin Enters 2025 As An Established Form Of Money

2024 was a good year for bitcoin. The leading cryptocurrency surged 126%, entered the big finance with spot ETFs, and even made it to the political arena, with a pro-crypto U.S. president and many supportive members of Congress coming into office in 2025.

These developments aren’t mere happenstance. They are the result of 16 years of steady progress in bitcoin’s development, adoption, legal advocacy, and an ongoing public discourse about the nature of money. Controversial monetary policies of the recent years contributed to this success as well. Developed countries realized they were not safe from inflation (something the rest of the world knows all too well), acknowledging bitcoin’s potential as a store of value.

Technological innovations have further reinforced bitcoin’s position. Improvements in payment systems have helped democratize and promote its role as a means of payment.

Classical economic theory identifies the store of value and the means of exchange as the two core functions of money. The third is the unit of account, and this is the role that bitcoin is yet to achieve fully. Its current volatility—typical for a young asset—and limited adoption make this difficult. However, as adoption grows and bitcoin appreciates, bitcoin volatility is likely to 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, signaling increasing adoption. In light of these trends, one could argue that bitcoin starts 2025 confidently positioned as a new form of money.

Bitcoin As A Store Of Value

In April 2024, bitcoin underwent its 4th halving, slashing the miner’s reward in half and effectively reducing its inflation rate to just 0.85%. Compared to most fiat currencies, this alone makes bitcoin stand out. Its predictability, diminishing inflation, and increasing scarcity are rare in today’s financial system.

Scarcity is not all, though. Contrary to what some critics claim, bitcoin is not backed by “nothing.” It is secured by large amounts of electricity that miners use to process transactions and create new coins. In 2024, bitcoin’s hashrate grew from 520 million TH/s to 790 million TH/s, an all-time high, as shown by Blockchain.com. This represents a colossal computational effort, meaning that the entire bitcoin miner network now produces 790 quadrillion (790,000,000,000,000,000) operations per second. To put that into perspective, DNA sequencing requires approximately 1 quadrillion operations. The Event Horizon Telescope network needed roughly 180,000 quadrillion operations to create the image of a black hole — an effort that took the team two years and 5 million CPU hours on high-performance computing clusters. Though the nature of these operations differs, this illustrates the immense power supporting Bitcoin.

Bitcoin Adoption As A Store Of Value

It is very difficult, if not impossible, to see how many people hold bitcoin. However, as the leading crypto gains in notoriety, more entities, such as public or private companies, are emerging as identifiable holders. Furthermore, the launch of spot bitcoin ETFs in the U.S. at the beginning of 2024 accelerated the growth of bitcoin-backed funds, whose holdings can also be identified.

These entities increasing their BTC holdings are a good indicator of bitcoin’s growing importance as a store of value. According to BitcoinTreasuries, the number of BTC in corporate treasuries has grown by 31% in 2024, reaching 998,374 BTC. This surge in corporate adoption was further facilitated by new guidelines from the U.S. Financial Accounting Standards Board, which allowed companies to report crypto holdings at fair market value.

In 2024, the number of BTC in funds grew by 66%, reaching 1,283,812 BTC. The new spot bitcoin ETFs played a major role in this progress, exceeding $123 billion in assets under management by the end of December, according to TheBlock.

This brought the total AUM of all bitcoin-backed ETFs to $129.2 billion. This number is all the more impressive given that all gold ETFs currently manage $128.9 billion, as reported by K33 Head of Research Vetle Lunde.

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

Bitcoin As A Means Of Payment

Bitcoin use as a means of payment is growing too, even though the blockchain remains rather slow, with a capacity of only 7 transactions per second. This constraint 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 establish bilateral off-chain channels, bypassing Bitcoin’s on-chain limitations, 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 Bitcoin’s mainchain, with average fees under one cent compared to Bitcoin’s current average fee of $1.80. As a result, the Lightning Network is also ideal for micropayments, establishing itself as the main method of payment within the Bitcoin ecosystem.

Bitcoin Adoption As A Means Of Payment

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

According to TheBlock, the Lightning Network capacity has doubled from $227 million in January 2024 to $500 million by the year’s end.

The capacity of Lightning channels is not a direct indication of how much BTC circulates in the network – the exact number cannot be calculated. Yet, it provides a good estimate of the potential circulation, 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 on the rise too. 1,400 new locations were added to BTCMap in 2024, bringing the total from 6,300 to 7,700 up-to-date locations. Most merchants accept both on-chain and Lightning payments.

As Bitcoin progresses, it serves as a reminder that money is not confined to fiat currencies. With its unique structure, mechanism, and backing, bitcoin now serves as a store of value and a means of payment, potentially adding the unit of account role in the future. Sixteen years after its launch, Bitcoin redefines conventional perceptions of money, offering an alternative to the modern monetary system.