The Investment Case for Bitcoin
Bitcoin is increasingly used as an asset with monetary value and adoption is growing. How does it fit within an investment portfolio, and what impact would an allocation to bitcoin have?
- Digital gold: Like the metal, bitcoin is a potential store of value.
- Portfolio diversification: Bitcoin has very low correlation with traditional asset classes, such as broad market equity indices, bonds and gold.
- Rising demand: More investors are buying bitcoin, including institutional investors.
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Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance.
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