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By Nigel Green
Michael Saylor, the Executive Chairman of Microstrategy, has recently proclaimed on CNBC that Bitcoin is now the “world's most popular investment asset.” He added that “it a natural addition to the portfolio of responsible investors.”
His assertion is based on the fact that one of Bitcoin’s defining characteristics is its ability to remain uncorrelated to the performance of other risk assets such as stocks and bonds.
Let’s take a dive into this…
It’s true that unlike traditional investments that often march to the beat of economic indicators, Bitcoin dances to its own tune.
This independence from the ebb and flow of traditional markets can provide investors with a hedge against the volatility that can afflict more conventional assets.
Consider the market tumult that often accompanies economic downturns. Historically, conventional investments have displayed a certain level of correlation, causing portfolios to suffer collectively during market downturns.
In contrast, Bitcoin has demonstrated an impressive lack of correlation during times of financial stress. For example, during the global financial crisis of 2008, Bitcoin was in its nascent stage, yet it showed a resilience that foreshadowed its potential as a unique asset class.
Similarly, in the tumultuous year of 2020, Bitcoin not only weathered the storm but emerged as a store of value, outperforming many traditional assets.
The Microstrategy boss would undoubtedly argue also that what sets Bitcoin apart from the conventional financial instruments is its immunity to the conventional risks associated with countries, currencies, companies, and economic cycles.
Traditional investments often carry exposure to the fluctuations of national economies, currency devaluations, corporate performance, and market competition.
Bitcoin, being a decentralized and borderless digital currency, is typically immune to these traditional risks.
It doesn't hinge on the fortunes of any specific nation, doesn’t suffer the consequences of currency fluctuations, and isn’t tethered to the successes or failures of any particular company or industry.
Consider the aftermath of major geopolitical events. Traditional investments can be heavily impacted by the geopolitical climate, leading to unpredictable market swings.
Bitcoin, however, operates on a global scale, indifferent to the borders and policies of any single nation. This characteristic could make it an attractive option for investors seeking a diversified and resilient asset that can withstand geopolitical tensions.
Also, the crypto doesn’t flinch in the face of company-specific events like quarterly results, product cycles, or competitive dynamics. It operates in a realm detached from the intricacies of individual businesses.
This lack of direct correlation to corporate events ensures that Bitcoin’s value isn’t shackled to the successes or failures of a particular company, providing a layer of insulation from corporate risks.
It also remains unyielding in the face of environmental and weather-related challenges. While traditional assets might suffer due to natural disasters or adverse weather conditions affecting production and supply chains, the digital asset’s decentralized nature ensures that it remains impervious to such localized disruptions.
Michael Saylor believes that by incorporating Bitcoin into investment portfolios, investors are not just diversifying; they are embracing a shift in the approach to wealth preservation.
He says the world’s largest and original crypto provides a haven that transcends the limitations of traditional assets, offering a refuge from the uncertainties of global events and economic fluctuations.
Bitcoin’s uncorrelation to traditional risk assets, coupled with its immunity to country-specific, corporate, and geopolitical risks, potentially positions it, says the crypto advocate, as a cornerstone of a resilient and forward-thinking investment strategy.
Of course, only time will tell. But for the time being, the super successful business leader is unshakeable in his confidence.
Author Bio
Nigel Green is deVere Group CEO and Founder
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.