A brief history of Bitcoin
Bitcoin was the first decentralized digital currency powered by blockchain technology. It quickly earned the title of “Digital Gold” for the fact that, just like gold, it behaves as a scarce commodity with a limited supply of 21 million coins. No one owns the infrastructure either. Over the years, Bitcoin has been resilient, being subjected to multiple market cycles but eventually giving a CAGR of 167% over the last 10 years! With a strong fundamental and current market momentum, this is just the beginning for Bitcoin if experts have to be believed and that makes it an interesting case for including Bitcoin in Investment Portfolios
The Case for Bitcoin in Portfolios
There are several factors that are critical to this consideration. Let us take a look at the key factors here:
Diversification
Bitcoin has acted as an excellent hedge during periods of economic uncertainty/market downturns. It also exhibits a very low correlation with traditional assets like equities, commodities and bonds thereby providing portfolio diversification.
Inflation Hedge
With supply hardcoded and every increasing demand, Bitcoin is often compared to gold as a hedge against inflation. Whenever there has been currency devaluation and excessive monetary policies in the past, Bitcoin has presented itself as an attractive store of value.
High Growth Potential
Bitcoin has been consistently outperforming all traditional asset classes and remains on the top of the best performing assets in History. Using Blockchain as its underlying technology, it continues to gain adoption across industries thereby becoming a long term bet.
Institutional Adoption: A Turning Point
A huge shift and shot in the arm for Bitcoin was when the first bitcoin ETF that the Securities exchange of the United States of America approved. This led to the growth of new financial models that sharp businessmen like Michael Saylor adopted with etf and direct bitcoin ownerships.
- Bitcoin ETFs: The launch of Bitcoin ETFs in January 2024 by financial giants like BlackRock, Fidelity, and VanEck saw inflows exceeding $1.2 billion in the first month, signalling strong institutional demand.
- Corporate Treasury Adoption: Companies like Tesla and MicroStrategy have allocated portions of their treasuries to Bitcoin, citing it as a strategic reserve asset.
- Regulated Products: The availability of regulated Bitcoin ETFs and other crypto instruments has made Bitcoin more accessible to traditional investors while addressing security and compliance concerns.
So, how does Bitcoin Fit into Modern Portfolios
There is an inherent need to have proper risk management and future proofing wealth, especially with an asset like Bitcoin. There are many ways to achieve this.