While it’s easy for the skeptic to find plenty of supporting evidence to argue against the merits of bitcoin and its potential for investors, there’s no denying that this marquee of digital currencies has an impressive track record of bouncing back. Negative publicity surrounding monetary fraud, suspicion of manipulation, and transactions of illicit goods and services may have mired bitcoin for some over its eight year history, but it has matured nicely as a value store.
So does bitcoin deserve a spot in your investment portfolio? As any financial advisor will tell you, unless you inherit a sizable trust fund or have the good fortune of winning millions, a portfolio diversified over a range of asset classes is essential to your financial future. A survey of current global conditions and trends suggests bitcoin is worth the consideration.
Perhaps the most outwardly observable accomplishment is bitcoin’s rapid price escalation over the past 18 months. From a value of about $430 per bitcoin unit at the beginning of 2016 to a present day value of nearly $1200, bitcoin is up big at 280% growth over the period. As the old adage of when to begin goes: If you didn’t get into bitcoin a year ago, the best time might be today.
Emerging national economies and movements towards cashless societies are two occurrences shining a favorable light on the future of bitcoin. Demand for bitcoin as a relatively stable, alternative currency is surging in countries like Brazil, Venezuela, and Turkey where the national currencies have experienced swift downturns in value. India recently throttled back the circulation of its printed currency to encourage electronic payment methods, a space where bitcoin flourishes by design.
China provides a stellar example of how bitcoin, as an international currency, streamlines transaction efficiency and speed across boundaries. Despite China’s arduous landscape of monetary regulations, recent reports estimate that the country accounts for 80% of all mined bitcoins and around 75% of all traded bitcoins. Much of this bitcoin generated wealth is shipped offshore into the global economy. Bitcoin will continue to rise organically in stature as long as it plays a vital role in the world’s second largest economy.
Despite the volatile swings of which all asset classes are prone, bitcoin is increasingly proving itself as a reliable investment that can withstand events that shakeup global markets. While many markets plummeted in the days following Brexit, including the evaporation of $800 billion in the US market, bitcoin actually rose by 15%. In other words, it may be a valuable hedge to include in a stock heavy portfolio.
When economic uncertainty strikes, many investors are quick to venture into precious metals, especially gold. However, a look at the comparative performance of gold versus bitcoin over recent years reveals that the smart money is in bitcoin as a new kind of gold rush. While Gold prices have posted an annualized loss of 6% since 2012, bitcoin returns have soared at a 155% annualized gain over the same period. Advocates of bitcoin often claim that it will maintain value as long as the internet exists. Such prognostication surely renders it as safe as gold in our hyperconnected age.
The simple rule of supply and demand suggests that bitcoin values may jump in the future. Bitcoin is a finite resource, since no more than 21 million coins will ever be produced. Couple this fact with bitcoin’s rocketing growth rate in wallets and acceptance at established banks since inception, and a real case forms for long term inclusion in your investment portfolio.