Mao Lal is from Berlin, Germany and he is a big investor in Bitcoins. Mao Lal always thinks about being successful in life. While market watchers await the arrival of Dow 20,000, Bitcoin, the nascent digital currency nearing its 8th birthday, makes actually reach its own milestone before the Dow as it continues its multi-year bullish rally towards $1000.
Since the Presidential election of Donald Trump, markets can more clearly price future expectations and in turn, both Bitcoin and the Dow Jones Industrial Average are rallying to near unprecedented heights. The surge of Bitcoin’s price, however, has primarily been fueled through interest abroad, with geopolitical pressures and monetary environments in China, India, and Venezuela pushing investors towards the independently minded digital alternative.
Over the years, Bitcoin has performed strongly with significant returns and continuing customer adoption. Of all currencies worldwide, Bitcoin yielded greater returns than any for 5 out of the previous 6 years:
- 2011- Bitcoin +1500%
- 2012- Bitcoin +299%
- 2013- Bitcoin +5400%
- 2014- USD +13%
- 2015- Bitcoin +37%
- 2016- Bitcoin +130%
These are outstanding payouts over a 5-year stretch for any asset, stock, bond, derivative, or currency. With bitcoin soaring again, the underlying computational network stronger and more secure than ever, and a multitude of reliable, user-friendly wallets services, applications, and resources arising, is it time for investors to take a more serious look at investing in Bitcoin?
The graph atop this page shows normalized 5-year returns of Bitcoin against the FANG stocks. There are 4 primary takeaways from that chart:
Bitcoin is maturing as a retirement portfolio option: If an investor purchased bitcoin at any day other than a stretch of 11 days in late 2013, that investor would now be returning a profit. Because Bitcoin’s price started at near-0 and has shown so much fluctuation and growth, it has been difficult for the average investor to involve themselves confidently. These, however, are side-effects of pricing an emergent digital asset with no predecessor. Now that the market has increased liquidity, security, and regulatory guidance, a more mature bitcoin industry is encouraging wider adoption. Ecosystem-level metrics show that the Bitcoin network has been functioning well, as transactions per day have risen 258% over the past 2 years, while network participation fees and mining difficulty have grown similarly. In turn, investors should feel more confident in Bitcoin’s long-term viability and existence, as it cannot be easily shut down and incentives are not aligned among stakeholders for it to ‘go away’.
- FANG assets productive, Bitcoin more productive: A quick glance at the normalized chart above signals that, generally, Bitcoin has outperformed the overall strong FANG assets. While Amazon remains bullish, Bitcoin’s rise shows that its percentage-based returns have been stronger than any other asset class above.
Bitcoin's technical resilience: Bitcoin’s technical patterns of numerous ascending triangles in the graph above demonstrate the investment’s resilience to prosper even through multi-year downturns. Because there will only ever be 21 million bitcoins, the scarcity of the asset class, combined with increasing demand abroad, is making its medium-term growth a safer bet. Moreover, the rapidly rising mining difficulty on the bitcoin network puts additional upward pressure on the global exchange pricing so that miners, many of whom are based in China, can meet their operational costs.
Bitcoin macro-economically hedges: Whereas the traditional assets and FANG stocks tend to cluster and correlate, bitcoin remains relatively independent of the traditional pressures such as end-of-quarter reporting, company performance, and institutional confidence of public stakeholders, which often distorts markets. Bitcoin provides an excellent hedge against potential downfalls of traditional assets and is a distributed, open-source project with no centralized organization or authorities overseeing its governance.
