Billionaire investor Chamath Palihapitiya, a venture capitalist and former Facebook executive, recently argued that bitcoin has a “structural flaw” that could limit its long-term adoption by governments and central banks.
Speaking on the People by WTF podcast during the World Government Summit, Palihapitiya said that for a digital asset to be widely accepted at the sovereign level it must possess characteristics that make it suitable for central bank reserves.
According to Palihapitiya, bitcoin falls short in two important dimensions: privacy and fungibility. Fungibility refers to the idea that each unit of an asset is interchangeable and indistinguishable from another. With physical money or gold, one unit is effectively identical to any other unit.
Bitcoin, however, operates on a transparent blockchain where transaction histories are permanently recorded. Because coins can be traced back to previous transactions, some units may be associated with illicit activities, meaning certain coins may be treated differently than others.
Palihapitiya argues that this traceability weakens the fungibility of bitcoin and reduces its suitability as a reserve asset for central banks.
So far, only one central bank has publicly revealed the purchase of bitcoins: the Czech National Bank.
Instead, he says gold satisfies both privacy and fungibility requirements for sovereign institutions, which is why central banks continue to hold large reserves of gold.
For that reason, Palihapitiya suggested that Bitcoin could struggle to achieve another tenfold increase in market capitalization driven by central bank demand. Instead, he hinted that other crypto projects or smaller tokens could eventually address these limitations.
Palihapitiya remains optimistic about innovation in digital finance, particularly stablecoins, which are cryptocurrencies designed to maintain a stable value by being pegged to assets such as the US dollar or commodities.
He pointed to the potential of gold-backed stablecoins as an example of financial innovation that could reduce friction in payments and settlements.
Meanwhile, Jason Calacanis, another venture capitalist and co-host of the All In podcast, discussed bitcoin-related corporate strategies with crypto entrepreneur Erik Voorhees on the This Week in Startups podcast. Calacanis asked Voorhees about Strategy (MSTR), formerly MicroStrategy, the public company known for holding the largest corporate bitcoin treasury.
Voorhees, a longtime Bitcoin advocate and founder of cryptocurrency exchange ShapeShift, said the strategy of accumulating as much bitcoin as possible is consistent if the company firmly believes in bitcoin’s long-term value. Calacanis was more skeptical. He said that when financial structures become difficult to explain or rely on new metrics, such as “community EBITDA,” it raises red flags for him as an investor.
This comes as hedge fund billionaire Ray Dalio recently commented that “there is only one gold.
