In 2020, we conducted an analysis of bitcoin’s attributes and examined the argument for considering the first and largest digital asset as a store of value. Over three years later, Bitcoin’s resilience and continued growth have reaffirmed its status as a unique asset class with potential relevance in an investor’s portfolio.
For newcomers to digital assets, the question often arises: “What purpose does bitcoin serve within a portfolio?” As the digital asset ecosystem evolves, Bitcoin may fulfill multiple roles simultaneously, either as a foundational element or through incremental layers. An intriguing aspect of Bitcoin is its versatility, as its utility is not confined to a singular function. We recommend individuals seeking a comprehensive understanding of Bitcoin’s distinctive properties and historical applications to review our previous overview.
In this updated analysis, we turn to the perspective of Fidelity Digital Assets, a subsidiary of Fidelity Investments, which introduced the Fidelity Wise Origin Bitcoin Fund (Net Assets $2.3B according to Yahoo Finance). According to Fidelity, bitcoin represents an aspirational store of value. We reinforce the competitive advantages of bitcoin while examining its advancements and potential catalysts that may influence investors’ perceptions regarding the role of digital assets in a portfolio.
• Despite lacking widespread acceptance, many investors view bitcoin as an aspirational store of value due to its possession of key store of value attributes.
• In the early stages, bitcoin’s volatility has served as a catalyst, drawing attention, fostering development, and driving innovation.
• Digital scarcity, a novel concept, is among bitcoin’s most distinctive innovations, playing a crucial role in its store of value proposition.
• Bitcoin’s scarcity was integrated into its protocol from inception, with its decentralized network and proof-of-work mechanism ensuring the independence of its monetary policy.
• The United States’ increasing fiscal deficit and rising interest rates have resulted in substantial annualized interest payments, potentially amplifying awareness and adoption of bitcoin within the country. Furthermore, longer-term trends, such as the intergenerational wealth transfer to Millennials, who exhibit greater enthusiasm for digital assets compared to older generations, may serve as additional drivers for bitcoin adoption.
Fidelity analysts come to a conclusion:
Bitcoin’s inherent properties suggest its potential as a store of value, with its decentralized settlement network (Bitcoin) and digitally scarce native asset (bitcoin) acting as complementary components. However, sustained demand for these unique features is crucial for long-term value creation and storage.
External factors, such as unprecedented levels of global monetary and fiscal stimulus, are fueling interest and investment in bitcoin. This amplifies concerns that bitcoin was designed to address, potentially driving more investors towards it as a hedge against unforeseen consequences. Additionally, the gradual transfer of wealth from older to younger generations presents a significant long-term catalyst for bitcoin adoption.
While bitcoin’s success as a store of value is not guaranteed, the mentioned tailwinds may generate incremental demand for this novel asset if sustainable long-term demand for its use case emerges.
Disclaimer
Be forewarned that the content within our website is presented in utmost sincerity and intended for informational purposes only. Any course of action undertaken based on this information is solely at the reader’s discretion, assuming full responsibility for their decisions. This content also does not seek to persuade or advise anyone to invest, as it does not offer financial or trading guidance. We urge you to exercise caution and conduct thorough research, seeking guidance from a skilled financial advisor, before engaging in cryptocurrency or securities investments.
