Is Bitcoin a good investment?
You might have asked yourself this question more than once over the past weeks, months, or even years. However, the issue has never been as timely as it is at the moment.
Many investors are already putting their capital in Bitcoin and successfully turning a profit. In 2020, the cryptocurrency has gained more traction than ever before. Furthermore, its status as an investment vehicle has been solidified thanks to an unprecedented interest from large institutional investors. If there has ever been a time to consider a Bitcoin investment, that time seems to be right now.
However, is the cryptocurrency worth all the hype? Or does the risk related to the digital asset’s volatility outweighs the potential rewards?
Of course, that is the question every investor must answer for him- or herself. Still, as a company focused exclusively on crypto investments, we think there are sound reasons to believe Bitcoin and other selected cryptocurrencies are the investment opportunity of a decade.
Our team at ARK36 managed to boil down these reasons to 10 concise and clear arguments. Read on to learn why investors are increasingly recognizing Bitcoin’s true potential and how you can capitalize on this opportunity.
1. Best Historical Returns Over Medium and Long Term
Consider this: if you had invested as little as $30 in bitcoin in 2010 (at the time you could buy as many as 10,000 bitcoins for that amount), currently, you would be sitting at more than $190 million worth of bitcoin.
If you think that’s an unfair example (after all, you likely haven’t known about cryptocurrencies back then) – let’s take a look at another one. In October 2015, you could buy 2 bitcoins for the amount of about $1,000. Those two bitcoins would now be worth almost $40,000. And even if you had invested at the beginning of 2020, you would still be sitting on a 300% gain.
Of course, anyone dealing with financial markets professionally knows that past performance is not necessarily indicative of future returns. In other words, the fact that an investment has generated profit in the past does not guarantee that it will continue to do so.
Nevertheless, all asset classes carry some kind of risk – even if they seem safe or successful over long periods. What’s undeniable is that Bitcoin has already demonstrated its ability to produce wonderful results over the medium and long term. That opportunity is there for you to seize it.
2. Low Correlation with Other Established Markets
“Diversify your portfolio” is the mantra of all professional investors – and for a good reason. If you spread your investment over different assets, your wealth won’t suffer too big of a blow if a sudden downturn strikes the sectors of the economy you have invested in.
In a diversified portfolio, you could still turn a profit on asset classes unrelated to the affected industries. Therefore, it’s reasonable to include in your portfolio a few assets uncorrelated to your dominant investments.
Crypto assets provide an important strategic advantage in that regard. Their correlation with the established markets has historically been weak. This means that crypto-assets may remain unaffected by a negative trend – or even a sharp fall – in the stock market.
That’s why owning crypto assets in an investment portfolio may prove to be an effective diversification strategy. However, as an asset class, cryptocurrencies have even more advantages. We will consider them in the following point.
3. Bitcoin as a Supply-Scarce, Hard Value, Anti-Inflationary Asset
In everyday life, we rarely think about what money is and why it has value. Overall, we simply recognize and accept that state-issued currencies like the euro, the dollar, or the yen are worth something to us and other people and that they can be given in exchange for goods.
State-issued – or fiat – currencies are indeed useful as a medium of exchange. However, as a store of value, they have certain limitations. In the long run, cash tends to lose its value due to inflation. Inflation is the tendency of a currency to lose its value over time. This can happen because of a variety of reasons, for example, when governments printed and put into circulation more money.
Here is where Bitcoin differs from traditional money. While governments can increase the supply of fiat currencies, the number of bitcoins in circulation cannot be arbitrarily increased. Rather, the whole network of participants must come to an agreement in order to make such decisions. This prevents Bitcoin from losing its value over time due to the influx of new bitcoins into circulation.
Also unlike traditional money, the supply of Bitcoin – the total amount of bitcoin that can ever be produced – is finite. Bitcoin’s underlying software structure has a hard-coded limit on the supply set at 21 million. Once this threshold has been reached, no more bitcoin will ever come into existence. This particular feature of Bitcoin makes it similar to commodities. It is also one of the reasons why it is more and more frequently referred to as the “digital gold”.
4. Bitcoin Still Has a Considerable Upside Potential
In the context of investing in financial markets, a popular opinion holds that the so-called smart money invested first. These are the experienced, well-informed, and well-connected – for example, large institutional investors. The general public, who arrived late to the game when the markets had already matured, is believed to lack that initial advantage and so cannot hope to be as successful.
For Bitcoin, however, the exact opposite is true. Bitcoin and other crypto-assets were launched directly and exclusively on the Internet. In the beginning, the cryptocurrency investment space was dominated by people interested in cryptography and other technology nerds. Those early adopters were quick to see the potential of this innovation. But as cryptocurrencies evolved, more people quickly followed suit.
These retail investors were mostly amateurs and regular Internet users – as large and professional investors historically treated crypto assets with a lot of scepticism. And so, when the crypto boom started in 2017, the regular people and not professional investors made the most money.
Now, at long last, professional investors have likewise recognized the undeniable potential of crypto. They have proved that by making considerable investments in the space. As a result, the markets have matured and Bitcoin gained even more recognition as an investment vehicle.
However, now is still the time for individual investors to participate in the market. While the price of Bitcoin has been rising significantly, there is still a potential for a much sharper positive trend – and with it, an opportunity for a considerable profit.
5. Bitcoin is Both a Risk-On and Risk-Off Investment
For some time now, many commentators have speculated that Bitcoin may be emerging as a new safe-haven asset. Now, there is growing evidence to support this narrative. As a consequence, the recognition of Bitcoin as a potential safe haven is becoming more widespread.
Safe haven investments are asset types that are able to retain their value through times of global distress, uncertainty, and great market turbulence. Investors seek them out to limit their exposure to losses in the case of a general economic downturn.
Bitcoin may provide such an advantage due to two of its fundamental features that we have already discussed above. These features are supply scarcity as well as low (or perhaps even negative) correlation to the general markets.
Bitcoin is also a piece of technology – and innovative technology at that. This is a part of the cryptocurrency’s appeal. It means that it has the potential to become used in new, innovative ways, resulting in greater adoption of Bitcoin in other areas of life. Bitcoin even has the potential to change how we perceive, transact, and store value.
However, investors should also remember that the Bitcoin network is only 10 years old and so, there are still a lot of unknowns in the space. Due to that, Bitcoin should also be perceived as a “risk-on” asset.
6. Bitcoin Isn’t the Only Cryptocurrency Available
Bitcoin is the cryptocurrency that became widely available and used – but it hasn’t been the last. Its development has sparked a true revolution and enabled virtually any entity – private or institutional – to issue a blockchain-based crypto asset or token.
To do so, such an entity won’t have to apply for approval from a centralized authority. Neither does it have to go through costly and complicated procedures, as it is the case, for example, with getting listed on the stock market. Thanks to that, it is easier for new and exciting projects to get public funding. It also makes it easier for the average investor to participate.
Of course, new projects in the cryptosphere usually come with a great deal of risk. Investing in such projects will require enhanced due diligence on the part of the investor. Nevertheless, all investors can participate in new projects in the cryptosphere, join them early on, and capitalize on the great upside potential they often produce.
7. Many Traditional Investors Have No Knowledge of Crypto
The technology that made cryptocurrencies possible is complex. To be able to understand cryptomarkets fully, you need more than experience in just finances or investments. That’s why there are still relatively few people or entities who truly specialize in investing in these markets.
At first glance, this may seem like an obstacle for new investors who don’t have such expertise and experience in the crypto space.
On the other hand, if you are a skilled investor and have the necessary financial background, you will have an edge over the majority of participants in the crypto markets who – as we mentioned above – are regular Internet users with no previous experience in investing.
The best results, however, will be achieved if you decide to join forces with an investment company focused exclusively on trading crypto assets – like ARK36.
8. Crypto Assets Can Never Be Taken Away From You
We have already mentioned that diversifying into Bitcoin can protect your investment portfolio from unexpected losses. However, Bitcoin offers such protection in more than one way.
Bitcoin is the first asset in history that can never be confiscated from its rightful owner. Like other cryptocurrencies, Bitcoin only exists digitally. Additionally, thanks to its cryptographic design, you can only move bitcoins from one digital “address” to another if you know a password set by the sender for the purpose of the transaction.
If you are interested in the history of money, you have likely heard about governments confiscating gold that was legally owned by their citizens and coercing them into accepting paper money in exchange. Something similar could never happen with Bitcoin making it probably the safest asset in history.
9. Crypto Assets Have the Potential to Become Money
One of the reasons many commentators are sceptical about the long-term viability of Bitcoin and other crypto-assets is that it is supposedly unlikely for cryptocurrencies to become money – a widely accepted medium of exchange.
Indeed, Bitcoin may not serve that purpose as of yet. However, it’s important to remember that the technology behind Bitcoin has been around for only 10 years or so. Even if its use in some areas may still be limited, there is much room for future growth and more wide-spread adoption.
According to some estimates, the number of individual Bitcoin users increases by three to four times every year. Such a high rate of adoption is astonishing. In addition, the underlying technology keeps getting more efficient and more suitable for the ever-greater range of services. If this trend continues, Bitcoin certainly has the potential to eventually become “real money”.
10. High Volatility – a Blessing in Disguise
The crypto markets can still be considered “immature” in the sense that the total market capitalization is still considerably low. This creates an environment where, unlike in the traditional markets, prices can fluctuate dramatically and over very short periods of time.
It can be exciting when the price shoots – but when the markets make a dramatic downturn, one’s capital can be wiped out in a matter of moments.
In other words, the crypto markets are highly volatile. That’s why some investors may feel unsure about investing in them. However, volatility is not necessarily a bad thing provided that you know how to navigate these markets – or have an experienced portfolio manager who does.
At ARK36, we focus exclusively on investing in the crypto markets. We are confident in our ability to manage our investors’ funds in a way that allows us to make a considerable profit while avoiding heavy losses. If the arguments for investing in crypto sparked your investment in the potential of this innovative asset class, download our Investor Prospect for more information. You can also reach out to us through the contact form on our website.