As Bitcoin’s rising stature continues to gain momentum it is becoming clear that Bitcoin is becoming a serious investors choice just like more traditional options such as bonds, stocks and gold.
Bitcoin has outshone all other assets since its inception, offering higher returns than cash, stocks, bonds and gold. The issue serious investors are beginning to overcome is, the loyalty towards more traditional investments that have- more time in the game.
From the table above it is clear to see how Bitcoin outperforms the more conventional assets, offering highest returns for 10 out 0f 13 years.
Institutional Demand
The spot ETF filings by major institutions such as BlackRock, Fidelity, Wisdom Tree, Investco, Galaxy Digital, Valkyrie, and Ark Invest indicate a growing interest in Bitcoin as an asset class in the U.S.
This collective move by the some of the world’s largest asset managers demonstrates a shift in perception and trust of Bitcoin. Not only is Bitcoin now emerging as a new asset class it is gaining widespread credibility as an investment choice.
Spot ETF applications have helped alleviate concerns among the wider population surrounding the industry. Bitcoin is emerging on its own, as designed, outside of the wider cryptocurrency sphere. As people develop their own understanding of Bitcoin as is the case with the world’s largest asset managers their appreciation of it underlying technology improves. With this comes an inevitable broader adoption due to a wider acceptance in the financial industry.
Scarcity & Volatility
Bitcoin’s volatility has declined in 2023, reaching levels comparable to traditional assets like gold.
The graph below illustrates the reduction in volatility (Orange) over the years has reduced according to Glassnode.
Meanwhile, during this period of relative market stability, Glassnode data reveals that bitcoin owners are moving their assets off exchanges, presumably into cold storage for savings, at an unprecedented rate.
New Participants
As seen with the recent spot etf applications, the appetite for bitcoin exposure is increasing.
PWC predict By 2025, assets under management around the world (AUM) will have almost doubled – rising by 6.2% a year, from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the fastest growth seen in the developing markets of Latin America and Asia Pacific.
The scarcity of Bitcoin means that even if all institutions with assets under management wanted to allocate as little as 1%, this would translate to approximately $2 trillion.
The upcoming Bitcoin halving event, which reduces the number of new Bitcoin created and earned by miners, further constrains the supply. This impending supply shock underscores the unique challenges and dynamics of investing in this digital commodity.
Summary
Bitcoin, as discussed is becoming a strong participant among various asset classes, from gold to stocks. As Bitcoin has started to slowly decouple from traditional assets in terms of price volatility, with the correlation between the Bitcoin price and the overall U.S. Stock market reaching record lows, the digital asset is now very much on the radar of asset managers and individual investors world-wide.
Bitcoin’s recent track record and out-performance of more traditional assets such as, gold, bonds and stocks solidify its position as a new asset option in a changing financial landscape.
