Bitcoin (BTC) positioning and value logic: from peer-to-peer cash to a global value network

Since its inception sixteen years ago, Bitcoin’s asset attributes have been continuously evolving. It has not become the “peer-to-peer electronic cash” originally envisioned by Satoshi Nakamoto—retail payment share has fallen from 45% to 6%; but it is also far from an ordinary speculative asset—long-term holder supply has risen to 79%, and sovereign entities are beginning to consider it as part of reserve asset discussions.

This raises a core question: why has the explanatory power of halving cycles on Bitcoin’s price continued to weaken? Is the explosion of on-chain revenue ecosystems rewriting its definition as a “lazy asset”? Is the debate over security budgets a misjudgment rooted in technological pessimism, or does it reflect genuine systemic risks?

This article does not provide price forecasts nor attempt to define Bitcoin definitively. The goal is to analyze, based on on-chain data, macro indicators, and ecosystem evolution, the structural shifts in Bitcoin’s value logic, offering a clear coordinate system for medium- to long-term observers.

Evolution of Bitcoin’s Positioning

On January 3, 2009, Satoshi Nakamoto embedded a headline from The Times into the Bitcoin genesis block—“Chancellor on brink of second bailout for banks.” This serves both as a timestamp and a declaration of Bitcoin’s original mission: to establish a trustless, peer-to-peer electronic cash system. However, practical applications over the past sixteen years show that Bitcoin’s asset positioning is not static but has undergone three significant leaps driven by technological constraints, market choices, and institutional acceptance.

Phase 1 (2009–2013): Electronic Cash Experimentation Period
Early transactions involved many peer-to-peer payment scenarios, but 1MB block size and 10-minute block intervals limited competitiveness in high-frequency retail contexts.

Phase 2 (2014–2020): Digital Gold Establishment Period
After Segregated Witness (SegWit) activation in 2017, on-chain congestion eased, but market focus shifted toward store of value. On-chain data clearly shows this shift: long-term holder (LTH) supply share increased from 63% in early 2016 to 76% at the end of 2020, while retail payment share in daily on-chain transactions dropped from 45% to below 12%. Meanwhile, institutional products like Grayscale Bitcoin Trust (GBTC) entered the market, and corporate treasuries began allocating BTC—MicroStrategy completed its first purchase of 21,454 BTC in August 2020.

Phase 3 (2021–2026): Sovereign Reserve Asset Emergence Period
In 2025, New Hampshire passed legislation to establish strategic Bitcoin reserves, becoming the first jurisdiction to include BTC on its balance sheet. In January 2026, the Czech National Bank launched a feasibility study on Bitcoin allocation. On-chain indicators corroborate this: exchange wallet balances declined from 14% of total supply in 2019 to 7.3% in February 2026, with self-custody and institutional cold wallets becoming mainstream.

[Table 1: Evolution of Market Attention to Bitcoin Narratives]

This table quantifies the sixteen-year shift in Bitcoin perception. The peer-to-peer payment narrative shrank from 85% to 6%, while the digital gold narrative peaked at 75% in 2020 and has since stabilized above 60%. The sovereign reserve narrative surged from 18% in 2025 to 28% in 2026, becoming the fastest-growing perception dimension. Data confirms that Bitcoin’s positioning is not a linear replacement but a layered upgrade—payment functions remain, but the consensus on value has migrated toward higher-dimensional reserve assets.

Bitcoin Security Mechanisms: PoW and Halving Model

Bitcoin relies on Proof of Work (PoW) to maintain distributed ledger consensus. Miners compete using SHA-256 hash power for block validation rights, earning block rewards plus transaction fees. This mechanism converts physical world electricity and silicon into a digital security budget.

Halving is an embedded monetary issuance rule: every 210,000 blocks (~4 years), the block subsidy halves—50 BTC → 25 BTC → 12.5 BTC → 6.25 BTC → 3.125 BTC (expected April 2024). This creates a deflationary supply curve: current annualized inflation rate is about 0.84%, below major fiat currencies, approaching zero around 2140.

Security Budget Debate: Miner Revenue Structure Challenges

Since 2025, researchers like Ethereum Foundation’s Justin Drake have warned that as block subsidies decline, if on-chain fees cannot fill the security gap, Bitcoin may face 51% attack risks. On-chain data supports this concern:

Source: CoinMetrics, Feb 2026

Fee revenue remains below 2% of total, while mining costs are correlated with Bitcoin’s price. This implies Bitcoin’s security model essentially depends on a dynamic equilibrium of “price × hash rate”: if BTC’s fiat price continues rising, total miner revenue can be maintained even as the number of BTC mined decreases. From 2024 to 2026, hash rate increased from 600 EH/s to 830 EH/s, while the price center rose from $45,000 to $98,000, validating this balance.

[Table 2: Relationship between Bitcoin Price, Hash Rate, and Miner Revenue]

This table illustrates the dynamic relationship during halving cycles. After 2024 halving, block rewards drop from 6.25 to 3.125 BTC, halving miner BTC income, but rising prices from $45k to nearly $98k restore fiat-denominated revenue. The sustainability of security budgets heavily depends on continued BTC price appreciation, which is also why layer-2 solutions must generate fee income.

Can layer-2 protocols compensate for security budget shortfalls? Projects like BitVM and OP_CAT aim to enable Turing-complete smart contracts without modifying the base layer, creating sustainable fee flows. Currently, Lightning Network channels hold over 5,430 BTC, with daily payments exceeding 500,000 transactions (as of January 2026). The ultimate solution for security budgets likely resides in the thriving layer-2 ecosystem rather than compromises at the base layer.

Bitcoin Economic Model: Scarcity and Store of Value

The core support for Bitcoin’s store-of-value narrative is its absolute supply constraint. The 21 million cap is hardcoded in the genesis block; any protocol change to increase supply requires over 95% consensus of the network’s hash power and nodes—an insurmountable threshold in practice.

Why does absolute scarcity have unique value?

Traditional store-of-value assets like gold and real estate are supply-limited by geology and development cycles but can still see marginal increases due to technological progress. Bitcoin’s supply is exogenous and rigid: issuance is fully predetermined and unaffected by demand. As of February 2026, about 19.78 million BTC have been mined, representing 94.2% of the total; the remaining 5.8% will be released gradually over approximately 114 years.

[Table 3: Evolution of Mined Supply and Long-term Holder Share]

The mined proportion rose from 50% in 2012 to 94.2% in 2026, marking the transition into a stock-to-stock game. Meanwhile, the long-term holder share increased from 45% to 79%, indicating a systemic decline in market participants’ willingness to sell. The simultaneous rise of these two metrics creates a reinforcing scarcity cycle—circulating supply increasingly locked in “non-liquid” addresses, with actual tradable supply shrinking.

Compared to gold’s store-of-value logic:

• Commonality: Difficult to increase supply, anchored by historical work, no issuer credit, global consensus.
• Difference: Bitcoin offers absolute verifiability, near-zero-cost transfer, and no physical storage costs. In 2026, physical gold’s annual custody cost is about 0.3–0.5% of asset value, whereas self-custodied Bitcoin’s marginal cost approaches zero.

Macroeconomic conditions reinforce scarcity narratives: in 2025–2026, US Federal Funds Rate remains at 4.25–4.50%, and concerns over fiat’s long-term purchasing power persist. The rapid development of CBDCs further emphasizes Bitcoin’s role as a non-sovereign, censorship-resistant reserve asset—not a digital version of any national currency but a hedge against fiat systems.

Bitcoin Price Capture

Long regarded as a lazy asset, Bitcoin’s value has historically depended on fiat appreciation—holders could only profit from price increases, not cash flows like equities or bonds. This characteristic is being reshaped by on-chain financial layers.

On-chain Revenue Scale Surges

As of February 2026, total BTC locked in layer-2 protocols and DeFi applications reaches approximately 387,000 BTC (~$38 billion), a 12-fold increase since early 2024. Revenue sources include:

Data from The Block, DeFi Llama, Feb 2026

Paradigm Shift in Value Capture

Bitcoin is evolving from “digital gold” toward “productive capital.” The essence: holders can deploy idle BTC into on-chain protocols to generate yield without relinquishing self-custody. Mining treasury strategies are changing: in 2026, about 18% of major miners’ BTC holdings are used for on-chain revenue strategies, up from less than 3% in 2022.

[Table 4: Comparative Features of Bitcoin’s Value Capture in Three Phases]

This table clearly shows the hierarchical leap in Bitcoin’s value capture capacity. Currently, stage 3 features a full spectrum of yields: low risk (2%–5%), medium risk (4%–8%), and high risk (variable). Locked BTC increased from under 100,000 in 2023 to 387,000, reflecting a significant acceptance of Bitcoin as a productive asset.

Risk warning: On-chain yields are not risk-free arbitrage. Smart contract bugs, layer-2 failures, and extreme market liquidations can cause principal loss. The conservative stance of Bitcoin’s base layer and the innovation of layer-2 must be balanced carefully—this is a core aspect of Bitcoin’s value proposition, setting it apart from other Layer 1 blockchains.

Bitcoin Pricing Logic

Historically, Bitcoin’s price exhibited a highly regular “halving–bull run–correction” four-year cycle. However, the market performance from 2024–2026 raises fundamental doubts about this classic framework.

Why is the four-year cycle narrative failing?

• Marginal supply impact diminishing: Over 94% of BTC is mined; halving’s absolute effect on circulating supply has decreased from 50% in 2012 to 1.56% in 2024 (based on circulating supply at the time).
• Institutionalized demand structure: The US spot ETF was approved in January 2024. By February 2026, 11 ETFs hold a total of 1,247,000 BTC, about 6.3% of circulating supply. Institutional inflows/outflows are now more driven by macro expectations than halving schedules.
• Increased macro factor influence: Correlation between on-chain data and macro indicators has risen significantly.

[Table 5: Evolution of Correlation between Bitcoin Price and Macro Factors]

This table shows the structural shift in Bitcoin’s pricing logic. While correlation with the Fed’s balance sheet remains high (~0.68), the correlation with halving has declined toward weak relevance (~0.31). The market is shifting from “endogenous supply rhythm” to “external macro expectations.”

Empirical Layered Pricing Framework

Current Bitcoin pricing can be decomposed into:

• Base layer (anchor): The halving mechanism’s supply scarcity narrative, establishing a long-term psychological threshold. On-chain data shows the long-term holder supply peaked at 79%.
• Upper layer (driver): USD liquidity, real interest rates, ETF net inflows, and sovereign allocation expectations jointly determine marginal prices. For example, after the Fed signaled rate cuts in December 2025, Bitcoin surged 34% in 30 days, with no significant change in on-chain fundamentals.

Future pricing may increasingly depend on macro indicators like the ratio of Bitcoin’s market cap to global M2 money supply. As of January 2026, Bitcoin’s market cap is about 0.46% of the broad money supply, leaving substantial room for growth.

Future Landscape: Expansion and Sovereign Asset Narratives

The next phase of Bitcoin evolution will run along two parallel main tracks.

Main Track 1: From Experimental Scaling to Commercial Deployment

By January 2026, Lightning Network channels hold over 5,400 BTC, with daily payments exceeding 500,000 transactions. Payment apps like Cash App and Strike have enabled fee-free Lightning payments. The BitVM bridge protocol is in testnet, aiming to support trustless Bitcoin smart contracts within two years. If layer-2 ecosystems generate sustainable fee flows of hundreds of millions of dollars annually, security budget concerns will naturally diminish.

[Table 6: Key Metrics of Lightning Network Growth]

Lightning’s capacity grew 352% over four years; daily transactions increased 25-fold. Approaching 530,000 daily payments, nearing the scale of small national payment systems. Maintaining current growth could see over 2 million daily transactions in two years, creating a sustainable micro-fee revenue stream to support Bitcoin’s security budget.

Main Track 2: Sovereign Reserve Narratives Spreading from Niche to Multi-Polar

Following New Hampshire, in January 2026, the Czech National Bank announced a feasibility study on Bitcoin allocation; Swiss regional legislators proposed allocating 1–3% of state reserves to Bitcoin. The motivation for sovereign adoption is shifting from speculative profit to a multi-polar reserve hedge.

Future application scenarios include:

• Cross-border payment infrastructure centered on Lightning, enabling near-instant, near-zero-cost international transfers.
• Sovereign reserves: Bitcoin becoming a reserve asset for small economies and regional governments.
• Corporate treasury standards: Public companies incorporating Bitcoin into treasury management and leveraging on-chain revenue tools to optimize funds.

In the long term, if sovereign adoption continues to deepen, Bitcoin could evolve from “digital gold” to a settlement layer of the global value network—a neutral, open, non-sovereign-backed reserve asset held collectively by sovereign entities. While still early, this narrative’s momentum surpasses mere commodity status.

Summary

• Positioning evolution: Bitcoin has transitioned from peer-to-peer cash to digital gold, now entering the early stage of sovereign reserve asset. On-chain data shows 79% long-term holder share, 7.3% exchange wallet share, confirming its dominant store-of-value role.
• Security mechanism: PoW and halving create a dynamic security budget. Hash rate at 830 EH/s depends on both rising BTC prices and layer-2 fee revenues.
• Economic model: Absolute scarcity distinguishes Bitcoin from fiat and other cryptos. With 94.2% mined, the stock-to-stock narrative is reinforced.
• Value capture: 387,000 BTC locked in on-chain yield strategies, transforming Bitcoin from a lazy asset into a productive capital.
• Pricing logic: The explanatory power of halving cycles is waning; macro factors like interest rates, liquidity, and ETF holdings are now primary drivers.
• Future landscape: Technological expansion and sovereign narratives resonate, positioning Bitcoin as a global settlement layer.

The trend: increasing institutional holdings, layer-2 application deployment, and sovereign reserve cases expanding from one to many will jointly shape Bitcoin’s value trajectory over the next decade.

FAQ

Q1: What is Bitcoin (BTC)?
Bitcoin is a decentralized digital asset based on Proof of Work consensus, with a fixed supply cap of 21 million coins. It functions as both a native network token and a trustless value transfer medium. Its positioning has evolved from a payment tool to digital gold and strategic reserve.

Q2: What are the core features of Bitcoin’s tokenomics?
The key features are the absolute supply scarcity and the predetermined issuance schedule. Halving every four years reduces block rewards by 50%. Current annual inflation is about 0.84%, approaching zero long-term. Scarcity underpins its store-of-value narrative.

Q3: Why has Bitcoin’s price historically exhibited cyclical patterns?
Historically, halving events caused supply shocks that, combined with market expectations, drove bull markets in 2013, 2017, and 2021. However, data from 2024–2026 suggests the model is being restructured, with macro factors (Fed rates, dollar index, ETF holdings) gaining dominance over halving cycles.

Q4: What recent changes have occurred in Bitcoin’s market pricing logic?
The logic has shifted from a binary “retail sentiment + halving expectation” model to a multi-factor framework involving macro liquidity, institutional allocations, and on-chain stock-to-flow analysis. The influence of four-year cycles has diminished.

Q5: What are the main debates about Bitcoin’s future?
Core debates focus on whether the security budget model is sustainable—can fee revenues compensate for declining block subsidies—and whether sovereign adoption will evolve from niche cases to mainstream economic policy. Both impact Bitcoin’s long-term valuation ceiling.

Q6: How can one earn on-chain yields with Bitcoin in DeFi?
Users can obtain yields by wrapping BTC (e.g., WBTC, tBTC), providing liquidity on Lightning, participating in Bitcoin lending markets, or staking on layer-2 networks. These yields carry risks like smart contract bugs, layer-2 failures, and liquidation events. Caution and thorough research are essential.