Can Bitcoin be termed as the ‘asset of the century’?

Summary 

  • Gold was priced US$2,067 per ounce on August 6, 2020, and is now at US$1,799
  • Big crashes have always been a part of stock markets
  • Bitcoin is being increasingly mainstreamed by big US banks and billionaires

Bitcoin is ‘volatile’. Volatile is the adjective used repeatedly with this asset.

From its April highs of nearly US$65,000, Bitcoin is currently trading at nearly US$33,000. Volatility is undeniable a part. But is Bitcoin the only volatile asset in the world?

Before we jump to any conclusion, let’s look at the history of volatility in stock markets.

Stock market crash, and gold volatility

Stock market plunge in 1929 gave way to the Great Depression. In 1929, the so-called ‘Roaring Twenties’ came to a screeching halt. It referred to a period of boom in 1920s. Americans increasingly moved towards owing cars, electronics, telephones and other durable goods. The gross domestic product (GDP) expanded remarkably, and stock market returned immense profits.

Between 1921 and 1929, Dow Jones Industrial Average surged by nearly 320 points, a massive feat considering the rise was 600 per cent. The plunge started in late October 1929 and in less than a month, it lost 50 per cent of its value. By mid-1932, Dow had lost nearly 90 per cent as compared with its peak value.

Time and again, crashes have happened despite stock markets becoming investors’ favorite investment tool.

A double-digit plunge was witnessed in 1987. The dot-com bubble burst brought the NASDAQ Composite Index down by nearly 80 per cent within a matter of few months in 2002. In September 2008, key stock indices were down almost 20 per cent owing to the widespread Financial Crisis.

The outbreak of COVID-19 was accompanied by both Dow and S&P 500 index losing over 10 per cent in February 2020.

Volatile is everything. Gold was priced US$2,067 per ounce on August 6, 2020. Nearly a year later, it was US$1,799 on July 22, 2021. On March 30, 2021, it was US$1,683.

Gold price in USD per ounce

Bitcoin as mainstream investment class

Toronto-based Purpose Investments launched the world’s first Bitcoin ETF on the Toronto Stock Exchange (TSX) in February 2021.

On market debut day, the ETF saw over US$165 million worth of shares exchanging hands. In less than two months, total asset value of Purpose Bitcoin ETF breached US$1 billion. Coinbase, a prominent cryptocurrency exchange, debuted on NASDAQ in April 2021. On the first day of trading, the company’s market capitalization breached a whopping US$100 billion.

Big banks in the US have also jumped onto the Bitcoin bandwagon.

JPMorgan has introduced Bitcoin investment services for retail clients. It is being speculated that clients of the bank can approach advisers for investing money in Bitcoin. The adviser in return will purchase stock in Grayscale and other Bitcoin trusts. In the past, other major banks, including Wells Fargo and Morgan Stanley, have announced similar Bitcoin exposure services for their wealthy clients.

After Canada gave approval to the world’s first Bitcoin ETF, Brazil became the second country to so. In March 2021, the Brazil Securities and Exchange Commission approved QR Capital ETF.

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Billionaires are keen on Bitcoin

Multi-billionaire CEO of Tesla, Elon Musk, has never shied away from declaring his optimism about Bitcoin. His tweets command great value in cryptocurrency investment space. Lately, in the B Word conference, Musk spoke favorably about Bitcoin and two other cryptos, Ether and Dogecoin.

In his latest take, Musk confirmed Tesla will restart accepting world’s most popular crypto, Bitcoin.

In the same conference, Twitter co-founder Jack Dorsey also sounded optimistic. He said Bitcoin can become the native currency of the internet and can even bring world peace. He hoped that like the internet, Bitcoin may have had humble beginnings, but the future is upbeat.

In February 2021, Musk made a statement that was somewhat ignored. He had said that holding Bitcoin is slightly better than holding cash. Musk drove home a valid point as cash holdings don’t create wealth.

It may be too soon to say that if Bitcoin will be the ‘asset of the century’. However, if one rejects this claim outright owing to volatility in the sector, the person can be reminded of volatility in conventional asset classes and big stock market crashes.

As more and more players embrace Bitcoin, just like El Salvador’s move to make it legal tender, Bitcoin may be on its way to becoming the asset of the century.

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