BigONE Strategy: Do you need Bitcoin in your cryptocurrency portfolio?
Since its inception, Bitcoin has skyrocketed. Despite a 74% drop in 2018, the price of cryptocurrencies nearly doubled in 2019 and nearly quadrupled in 2020. According to BigONE statistics, as individual investors’ adoption of cryptocurrencies grows, so does the entire trading volume of cryptocurrencies. In the early days of Bitcoin’s emergence, it was viewed as a digital alternative to the traditional currency controlled by the central bank, which piqued more mainstream investment firms such as Bill Miller of Miller Value Partners, Rick Rieder of BlackRock, and Paul of Tudor Investment. Several well-known institutional investors, including Tudor Jones, feel that Bitcoin is a long-term investment with great potential, especially after experiencing the previous Bitcoin rise.
Some people believe Bitcoin is a good investment, while others are skeptical. In summary, although Bitcoin has its own negative side, BigONE advises investors to include it in their portfolio.
Bitcoin is being hailed as a game-changing technology that will completely alter the monetary and payment landscape. Many people believe that because only 21 million bitcoins can be produced, the limited supply may help the currency’s price rise and successfully prevent the impact inflation would have on it. Bitcoin is widely viewed as an alternative to gold. Its advocates think that gold’s supply is equally finite. Gold has a clearer intrinsic value because gold is frequently utilized in jewelry, industrial uses, and tangible store of value.
BigONE believes that cryptocurrencies such as Bitcoin may profit from rising demand for safe international transactions, low-cost banking, and anonymous micro-payments or universal payments. Furthermore, network effects are connected to Bitcoin. Because of the expansion in holding addresses and application scenarios, the value of Bitcoin should theoretically be based on an exponential increase and increase in value with exponential growth.
Bitcoin’s restricted supply has also made it a viable hedge against long-term inflationary pressures. The market’s current five-year break-even inflation rate has exceeded 2.7 %t, which is higher than the inflation rate we’ve seen in recent years, thanks to the Federal Reserve’s increased money printing speed and the introduction of interest rate hikes. Bitcoin’s future worth is determined in part by its widespread acceptance and use as an alternative currency. It is not regulated by the central government, unlike traditional currencies. BigONE considers bitcoin to be the ultimate insurance against the depreciation of the US dollar or the collapse of the conventional financial system.
Although many individuals are hopeful about Bitcoin’s future development, and particular countries, such as El Salvador, have introduced relevant bills to constitute Bitcoin as national legal tender, some remain opposed to Bitcoin. These people believe that because Bitcoin is a virtual asset that does not generate cash flow, it has no intrinsic worth. Its value depends heavily on which payment method people are willing to utilize. When Guggenheim analyst Scott Minerd predicted that the value of Bitcoin might reach $400,000 in December 2020. Many analysts feel that even if Bitcoin appreciates, the asset value of Bitcoin will decline swiftly if there is no stable base to support its potential worth.
Bitcoin is commonly referred to as digital gold, although it has not performed particularly well during market downturns. For example, Bitcoin dropped around 45% of its value in the second quarter of this year. When the new coronavirus swept the globe, Bitcoin dropped by approximately 38%. During the volatility of the US stock market and the circuit breaker mechanism, when the entire stock market exhibited a negative total return, Bitcoin only obtained a positive result around half of the time.
Bitcoin Supporters often say that the limited supply should create a bottom line for the value of Bitcoin. But although the supply of Bitcoin itself is limited, nothing can stop the emergence of other cryptocurrencies. There are already many available Bitcoin alternatives in the current cryptocurrency market, including Ethereum, Litecoin, Cardano, Bitcoin Cash, etc. Bitcoin can play a role in portfolio diversification. Still, the impact of other cryptocurrencies' prices varies from time to time, and as Bitcoin becomes mainstream, its value as a portfolio diversification is getting lower and lower.
At this point, BigONE wants to popularize the Sharpe ratio for everyone, which is very important for your investment portfolio. The Sharpe ratio measures the revenue performance of an investment relative to risk-free assets after adjusting for its risk. The higher the Sharpe index, the higher the return concerning the risk, the more ideal the investment tool, and vice versa. Higher risk gains benefits. From the perspective of the investment portfolio, the high rate of return can offset its increased volatility. In cryptocurrency transactions, the Sharpe ratio will increase as the price of Bitcoin increases.
In general, BigONE is optimistic about Bitcoin as an investment asset. As mainstream investors increasingly accept Bitcoin, its value as a diversification tool increases, although no guarantee increasing Bitcoin will keep increasing. The risk-adjusted return of the investment portfolio, but BigONE still supports Bitcoin as a virtual currency, will help support the research and development of new technologies, such as smart contracts and financial transaction products with built-in encryption functions.
About BigONE
BigONE is a global cryptocurrency exchange that provides a platform for trading various cryptocurrencies. It was founded in 2017 and registered in the Netherlands. The group operates in Russia, Brazil, Vietnam, Seychelles, Singapore, Japan, and Indonesia, providing marketing, investment, and blockchain technology research & development.
