How the Internet works seems mysterious to most people, and we use it every day but rarely understand the complex science behind it. The same is true for Bitcoin, which is a complex phenomenon based on scientific principles. If you want to learn more about how Bitcoin works, you can start with VanEck's Bitcoin and Digital Asset Education Center and explore the white paper of Bitcoin founder Satoshi Nakamoto to understand the complexity of its technology.
Since its inception in 2009, Bitcoin has become a vital part of the mainstream financial conversation. So, as a financial advisor, why should you consider including Bitcoin in your clients’ portfolios? Here are three compelling reasons:
Historical Performance: Decade of Significant Gains
Investors often seek out strong performing assets, and Bitcoin is one such option. Despite its well-known volatility, Bitcoin has outperformed all other asset classes over the past decade. Bitcoin has been the best performing asset class in eight of the past eleven years. Here are the historical returns of Bitcoin over various holding periods (as of December 31, 2023):
1 year: 156.62% return
3 years: 50.00% return
5 years: 999.77% return
7 years: 5,147.10% return
10 years: 6,172.12% return
These data highlight the incredible growth potential that Bitcoin has shown over time, making it an attractive option for investors seeking high returns.
Bitcoin's scarce supply could increase its value
The total supply of Bitcoin is capped at 21 million, which is one of the core features of its design. Halving events occur approximately every four years, and each event reduces the reward miners receive for validating transactions by 50%. Based on historical experience, Bitcoin has the potential to perform well before and after the halving, making Bitcoin an attractive long-term investment option.
Store of Value: Digital Gold
Bitcoin's appeal as a store of value comes from its scarcity and fixed supply. This makes Bitcoin similar to traditional safe-haven assets such as gold, which are considered a long-term store of value. Therefore, Bitcoin, as a digital alternative to traditional safe-haven assets, may be suitable for investors who want to invest in
Clients who want to hedge against inflation, preserve wealth over the long term, and diversify their investment portfolios.
The future of Bitcoin
As Bitcoin has moved into the mainstream, its adoption has grown significantly. Merchants and businesses have become more willing to accept Bitcoin as a payment method, while the development of user-friendly wallets, exchanges, and marketplaces has removed the technical barriers to entry that existed in Bitcoin's early years.
Institutional investors' interest in Bitcoin is also growing. Hedge funds, asset management companies and endowment funds are beginning to realize the potential of Bitcoin as a means of storing value and an effective portfolio diversification tool. Currently, about $50 billion worth of Bitcoin is held by ETFs, countries, public and private companies, and the approval of a spot Bitcoin ETF will further increase the appeal of Bitcoin.
in conclusion
As an innovative asset class, Bitcoin offers unique investment opportunities. Its historical performance, scarcity, and ability to store value as digital gold make it an important option for financial advisors to consider adding diversification to their clients' portfolios. As the Bitcoin ecosystem continues to mature and become mainstream, it is expected to continue to attract more investor attention.
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