If you’re curious about Bitcoin and looking to understand more about the original cryptocurrency, there is a wealth of resources online for you to devour. Diversifying your portfolio with an emerging asset is both appealing and prudent.
If you’re looking for reasons to add Bitcoin to your portfolio -- here’s a short-list.
Despite the consistent claims that “Bitcoin is dead,” which typically arise during one of Bitcoin’s (admittedly) vicious bear markets, interest in the cryptocurrency is ballooning.
Over 76 percent of financial advisors in America reported receiving questions about crypto in 2019 from clients. Interest in Bitcoin and its accompanying asset class is palpable. Throw in a surging financial institution interest and product offerings, such as the recent CME launch of Bitcoin options, and the formerly elusive goal of mass adoption appears possible.
Central banks are even discussing (and in the case of China, developing) digital currencies as potential replacements to currently outdated infrastructure. And Facebook even unveiled Libra to considerable criticism, all because of the antifragile success of Bitcoin.
It’s not going away anytime soon.
Bitcoin continues to outpace returns of traditional assets. For example, Bitcoin's return in 2019 was 93%, which was more than triple the S&P 500 (29%) and significantly better than gold (18%).
Bitcoin experienced a major downturn following the unrealistic hype that pervaded the ICO mania of late 2017, leading to a -73% return in 2018. However, a cursory glance at Bitcoin’s historical price charts reveals a meteoric increase of nearly 60k percent over the last 7 years.
Even a small allocation of Bitcoin to your portfolio can help bolster its performance by a noticeable margin, and ensure you don’t miss out on any potential upward swings in the future.
Recent geopolitical tensions between the US-China and US-Iran have sparked a vigorous debate about Bitcoin’s place as a safe-haven asset compared to traditional safe-havens like gold.
In particular, CoinMetrics recently released a report detailing the strong correlation between Bitcoin and assets like gold during times of political turmoil -- mainly the US-Iran quandary. However, Bitcoin’s market still shows signs of inefficiency that leads to delayed responses to major geopolitical events, marking its status as a safe-haven asset as tenuous.
What’s evident is that the narrative is shifting, though. Bitcoin’s censorship-resistance has proven its mettle in cases like Venezuela to avert capital controls, and its status as a safe-haven asset is improving.
Modern investment apps make investing in financial assets as easy as a couple of clicks. With Change, investors can enter the Bitcoin market with as little as 1 Euro. Enabling mobile users to tap into Bitcoin’s potential with a simple Internet connection and narrow funding makes it an appealing choice for any curious investor looking to diversify their portfolio.
Younger generations (e.g., Gen Z & Millennials) have demonstrated a positive reception towards cryptocurrencies, a markedly different dynamic than the preceding generation. The obscure nature of Bitcoin and crypto to the broader public would likely be a prohibitive factor in injecting Bitcoin into your portfolio, but today the story is different.
Bitcoin is globally accessible and liquid, which makes it an ideal fit for any portfolio.
Bitcoin can serve as a hedge against the caprices of central banking -- specifically, a penchant for inflation.
For example, hyperinflation in Venezuela, Zimbabwe, and (soon) Argentina exposes the interventionist dilemma of central banking to fine-tune the economy. Once inflation spirals out of control, a nation’s money becomes virtually worthless, and the economy collapses. Even in the US, hidden inflation metrics taking the form of cost-of-living increases in major cities mark a concerning rise in inflation.
Comparatively, Bitcoin has a fixed monetary policy that is enforced through code, a social consensus, and a decentralized network. No monetary tinkering here, just a cemented policy that quietly churns out blocks of transactions roughly every 10 minutes.
Should inflation persist, concave risk could ensue when hoarding cash or other financial instruments strongly correlated to central banking interest rates (e.g., the stock market, bond yields, etc.). Bitcoin is almost a necessary modern hedge for any portfolio.
There’s a reason financial advisors, institutions (even academic endowment funds), teenagers, and older generations are investing in Bitcoin.
Instead of requiring reasons for investing in Bitcoin, you should be asking yourself: Why am I not investing in Bitcoin?
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