LONDON, ENGLAND – 20 NOVEMBER: A visual representation of the cryptocurrency Bitcoin on Nov. November  2020 in London, England The price of Bitcoin has been strong in the past two months to a high of around 18$ 800 up and has gained almost 100% since September This surge has brought the price of the cryptocurrency back to its all-time high of $ 20USD 000, where it peaked in December 2017. Since its introduction in 2009, the price of Bitcoin has seen many boom and bust cycles Proponents claim it is a revolution for the financial system while critics are calling it a speculative bubble (Photo by Jordan Mansfield / Getty Images)
It’s 2017 again as Bitcoin sees another huge surge in value, the cryptocurrency has tripled since September 2020 Does the final move mean it deserves a spot in your portfolio?
One of the key attributes of Bitcoin is its storage of value, which is especially important when the Fed is prioritizing low interest rates over potential inflation for the time being and the government is handing out stimulus checks that could cause the dollar to depreciate in value over time In this case, as we saw in the 1970s, holding onto real assets can be a valuable investment strategy. Gold, other commodities and real estate can maintain their value in times of currency weakness
Perhaps Bitcoin can be added to this list. Bitcoin is also unique in that the supply is limited.As the price of gold rises and gold mining companies are more looking for new supply, it can moderate the rise in price over time, with Bitcoin making deliveries regardless of the Price limited.This is a trait Bitcoin bulls prefer. When the price goes up, there is no natural way to get Bitcoin other than finding a willing seller
However, there are also risks Bitcoin is not a productive asset, which makes it difficult to value and can be responsible for its large fluctuations in price, which is in contrast to a company like Apple
This is where you can examine the profits and distributions to shareholders and determine a possible valuation. Even if the market doesn’t match you, you can still get dividends on your investment while you wait for the market to come
Bitcoin, just like gold, is more difficult to define.The value of the asset is not determined by a cash return, however, critics might argue that the valuation is far lower, but there is room for a higher valuation as well, since it is There is no obvious basis for the valuation of Bitcoin
As Bitcoin rises, the attention it attracts can cause returns to improve even further as the buy-in increases.This can be helpful as few institutional investors currently hold Bitcoin in physical size
It is important to remember, however, that price volatility has two sides in 2017, Bitcoin rose 20 times from this year’s lows, but gains were short-lived The price then fell 85% from the top over the next year if you were unlucky enough to buy at that top of course, Bitcoin still had an impressive bull run, but the swings along the way were tumultuous
Those who are excited about Bitcoin’s epic price hikes should understand that sharp declines have also been part of its history, however, the dollar’s current surge and potential weakness in the years to come could continue to push Bitcoin to mainstream Attracted greater attention
The fact that Bitcoin is owned by many investors could make a long-term argument in favor of the cryptocurrency, although much like gold, it is one of the more difficult assets to really judge where its value really lies
Simon is the author of Digital Wealth and Strategic Project Portfolio Management. Previously, he was Chief Investment Officer at Moola and FutureAdvisor, both
Simon is the author of Digital Wealth and Strategic Project Portfolio Management. Previously, he was Chief Investment Officer at Moola and FutureAdvisor Both are consumer investment startups later acquired by S&P 500 companies He is a CFA charterholder and trained in Oxford and Northwestern Articles are for informational purposes only, and are not for investment advice
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