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 at 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 does not meet two important criteria: confidentiality and fungibility. Fungibility refers to the idea that each unit of an asset is interchangeable and indistinguishable from another. With physical silver or gold, one unit is effectively the same as any other unit.
Bitcoin, however, operates on a transparent blockchain where transaction histories are permanently recorded. Since coins can be traced back to previous transactions, some units may be associated with illicit activity, meaning some coins may be treated differently than others.
Palihapitiya argues that this traceability weakens bitcoin’s fungibility and reduces its ability to serve as a reserve asset for central banks.
So far, only one central bank has made the purchase of Bitcoin public, the Czech National Bank.
In contrast, he argues that gold satisfies both the privacy and fungibility requirements of sovereign institutions, which is why central banks continue to hold large gold reserves.
For this reason, Palihapitiya suggested that Bitcoin may struggle to increase its market capitalization tenfold, 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 linked to assets such as the US dollar or commodities.
He highlighted 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 business 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 treasury in Bitcoin.
Voorhees, a longtime Bitcoin advocate and founder of crypto exchange ShapeShift, said the strategy of accumulating as much bitcoin as possible makes sense if the company strongly 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 remarked that “there is only one gold.”
