Guest post by: Flyer Wealth
The cryptocurrency landscape over the last decade has blossomed into an investor’s
sandbox across Bitcoin and other alternatives. As Bitcoin’s rise to fame continues, both
as a digital currency and investment, the volatility and volume of the asset have both
exponentially increased. Bitcoin’s size now rivals some of the top companies in the
world, like Google and Amazon, with an aggregate market cap in the neighborhood of
$2 trillion. But does Bitcoin live up to the hype? Bitcoin as an asset has outperformed
almost any other investment – rivaling Nvidia’s 5-year performance at an astonishing
+1,008.73%.
Much like gold, investors have bought into Bitcoin’s counter-inflation possibilities. The
hedge against the devaluation of fiat currencies has posed the question of Bitcoin’s
potential to reshape the global financial system into a digital and consumer-friendly
landscape. The integration of such replacement is yet to gain major traction, but Bitcoin
transactions per day are steadily rising 20% YoY. Bitcoin’s ability to combat inflation
comes from its finite supply, as only 21 million will ever exist. Decentralization of
Bitcoin’s roots means that the cryptocurrency operates without a single authority, like
how a government or bank would. Instead, all transactions and security are maintained
on a blockchain – which is a public network of users and their affairs. Bitcoin can be
sent to anyone, anywhere, anytime.
Bitcoin’s currency value is of course rising in the age of digital technology, but its
popularity as an investment has risen as well. Bitcoin as an investment is uniquely
positioned on pure speculation, as the underlying value is based solely on what a buyer
is willing to pay for it. The fact that Bitcoin’s price is exclusively tied to the bid-ask
spread is both a blessing and a curse – as neither upper nor lower bound is limited. If
buyers suddenly became disinterested in owning Bitcoin, the price would effectively fall
to zero; but if interest continues to drive up the bid, there is no ceiling for upside.
Many investors hold Bitcoin on a long time horizon, paired typically with a securities
portfolio. Bitcoin’s high short-term volatility makes it an unpredictable trade, but its
long-term track record depicts a stable buy-side demand, and thus a winning
investment.
More from this author: https://flyerwealth.substack.com/
None of this article or any subsequent Flyer Wealth content pieces are financial advice. Past
performance is not indicative of future returns, and investors should make individual decisions
based on risk tolerance and professional assistance when necessary.
