Cryptocurrencies — a Non-Correlated Investment

Originally Published By: 

The year started with Bitcoin rising above the $1,000 mark — and it shows no sign of slowing down. This has a flurry of people wanting to know more about it and wondering if it’s a better time to invest than ever. However, it’s important to understand exactly what Bitcoin is first. It’s not a stock or a traditional investment, but is a currency in and of itself. That’s part of the reason why it’s so enticing.

In times of financial uncertainty and distress, paper currency loses value while commodities tend to thrive. Right now, national debt is higher than it’s ever been. Interest rates are bottoming out, stocks aren’t rising as much as investors would like them to and there is a lot of political turmoil rising in the U.S. and abroad. Fear surrounding the economy is building and people aren’t sure of where to put their money. A lot of people have heard of Bitcoin but think it’s way too risky or aren’t sure how to purchase it or how its value compares to that of other currencies or commodities. But there are plenty of reasons why Bitcoin could be an interesting investment.

On the Rise

In 2016, the S&P 500 was trading in negative territory. SPDR Gold Shares climbed 14.4 percent, and Bitcoin climbed 74.9 percent. It’s been rising for the past half-decade and looks like it will only continue to do so. It seems to be unaffected by the dollar, so it offers a safe haven in terms of investments. This might not always be the case but it certainly has been for some time.

Cashless Economies

Many countries are looking to go “cashless” — like Sweden and Israel. As Global Central Banks continue to keep printing money, paper money loses more and more value. Many residents say they don’t need cash around for anything anymore — it’s becoming a liability and even retailers and vendors prefer card or phone payments. Consumers are interested in the privacy and autonomy in their money that they get with the store of value — and that is what Bitcoin can provide. A lot of countries, like India, are even getting rid of their top denominations in their currency in order to reduce corruption. Larry Summers, the former treasury secretary and director of the National Economic Council in the White House, also thinks it’s time to scrap the $100 bill. There’s a linkage between high denomination notes and crime, and he argues that shifting to cashless economies or other, safer forms of currency is going to be much better for investors and for society.

Bitcoin has seen some volatility over time, but the metric on it continues trending down. As it gets more stable, it will be involved in more real-world transactions, making it a more legitimate currency not backed by any particular government. Instead, people will only have to rely on technical progression, which seems to have no problem garnering faith even in turbulent economic times.

The Chinese yuan has been devalued many times and is now at its lowest rate against the U.S. dollar since March 2011. The Chinese are also intervening in equities and have suspended trading in their markets on multiple occasions. Financial experts like George Soros think we are on the brink of a collapse like the 2008 crisis all over again. These are the types of events that panic investors and make assets much riskier — unless they are in the form of virtual currency. Assets like this can diversify and weather dislocations in global markets, and can help keep money more secure even in rocky years.

Decentralized Currency

Bitcoin is totally decentralized so it’s not reliant on the economy or dealings of one country or the stocks and commodities within that country. It’s the first to market in the cryptocurrency space and probably won’t be the last, but it could remain the most valuable. The pioneering technology of Bitcoin and Ethereum have been trading profitably for the last two to three years, which means it might be here to stay. Here are a few more reasons it makes for an interesting investment right now:

1. The supply is totally fixed. You know how much exists and can predict how much more is on the way.

2. It might soon be “tradable” for a wide variety of products and services, creating ease of payment and raising its value.

3. The higher the price, the more likely people are to use it. The more people using it, the more valuable bitcoin becomes.

4. More and more investors are using it as a portfolio diversifier.

5. Most governments have a positive, if cautious, attitude for it, since it’s easy to declare as a property or commodity for tax purposes.

The global nature of Bitcoin makes it a promising investment to consider. It’s a completely decentralized currency that isn’t affected by government intervention or control — and it has a predictable supply, unlike paper currency. It’s safe to say that Bitcoin will certainly alter our concept of money and investments, which means that now might be an interesting time to buy into it.


Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Please do your own homework.

Jake Ryan is the founder of Tradecraft Capital, a startup advisor, an angel investor & writer on investing. If you enjoyed this article “clap” to help others find it! For more, join us on Facebook, Twitter.

About the author Jake Ryan

Jake is the Founder and CIO of Tradecraft Capital and handles all aspects of investment management for the firm.

He is the author of Crypto Asset Investing in the Age of Autonomy.

Contact Tradecraft Capital

We will never sell your email to any third party

This field is for validation purposes and should be left unchanged.