Bitcoin, like any asset that can never produce earnings, has an intrinsic value of $0.00; it’s only worth what other people will pay for it. So why has it become an integral part of so many portfolios?
“Every project I studied in crypto seems like garbage to me, and it doesn’t really have a real reason to exist — other than Bitcoin, which I think could turn out to be one of the most important inventions in all of human history,” Mark Casey, portfolio manager at Capital International Investors, said on May 17 at the Morningstar Investment Conference.
Christopher Lin, portfolio manager at Fidelity Investments, said it is important to understand the true problems that cryptocurrency — specifically Bitcoin — actually solves; it is not a panacea for everything digital in the world and should not be thought about that way.
Bitcoin solves three problems that everybody in the world has, whether they know it or not, Casey said.
“First of all, it’s the hardest asset ever to inflate, there’s only going to be 21 million. More than a billion and a half people live in a world where their currency inflates at double digits every single year,” Casey said.
According to Casey, half the world — 4 billion people — live in countries where they don’t have good property rights enforcement. Meaning, if they put their money in a checking account, the government could take it out the next day.
“This even happened in Canada the other week with those trucker protests,” Casey said. “Bitcoin is the most unseizable money ever created.”
The final problem, while not a prominent issue currently in the U.S. and Europe, is financial censorship.
“Not many of us have been deleted from the financial system for saying something on Twitter that somebody didn’t like,” Casey said. “But again, half the world doesn’t have good property rights or governments that are fair to them, and so they’re at risk of financial censorship all the time — and Bitcoin is the first digital money that can’t be censored.”
Lin said the trilemma that a lot of the cryptocurrencies face is scalability, security, and decentralization. “Pick two. Bitcoin decided to pick decentralization and security,” he said.
“I would say [Bitcoin] is definitely the best store of value that planet earth has ever seen,” Lin said.
Diversified ETFs such as the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) or the Invesco Alerian Galaxy Crypto Economy ETF (SATO) can offer Bitcoin exposure. BLKC takes a broader approach aiming to capitalize on blockchain developments, while SATO, still diversified, offers more focused exposure to the cryptocurrency industry.
Spot cryptocurrency investments are inherently volatile, and investors may be able to find the same benefits with less volatility by gaining digital assets exposure through an ETF wrapper.
For more news, information, and strategy, visit the Crypto Channel.