There are already hundreds of crypto assets available throughout the world. In recent years, many individual and institutional investors have shown an increased interest in these assets. We’ll focus on bitcoin, the most popular cryptocurrency, which accounts for about moiety of the bitcoin business.
With a limited total quantity of 21 million coins, bitcoin was the first unique computerized asset ever produced. The “halving” mechanism cuts the fresh supply in share all four times until all 21 million money is made. So far, roughly 18 million coins have been mined, with approximately 5 million suspected of being dropped, 10 million in large-term frozen areas, and confined to 3 million on trades. Bitcoin’s viability as an asset class hinges on its scarcity. Curious to grasp more? Look at how bitcoin will ever be a major payment network.
Ere bitcoin and valuable metals were the only recognized unique assets (valued solely for their lack as a user repository). This ecosystem is rapidly evolving as the number of cryptocurrencies increases. In our view, bitcoin bonuses become the most strong network effects and the most significant business cap compared to other cryptos, resulting in the most stockholder trust.
We believe cryptos will benefit from this unique confidence, just as investors trust in the worth of gold because others deem it. We believe that these characteristics, together with increasing institutional engagement, make bitcoin less likely to be challenged by alternative cryptocurrencies at this time.
Bitcoin As A Means Of Storing Value
One of the most important aspects of bitcoin as an asset class is its position and history as a store of wealth. Since the onset of quantitative easing in 2008, global assets have seen asset price inflation. When we look at how investments have performed compared to the balance sheets of G4 central banks, we can see that stocks have moved sideways since 2008. In the meantime, global currencies, gold, and real estate have all depreciated in terms of balance sheets. Since 2008, Bitcoin has been one of the only assets that have outperformed the balance sheets of the G4 central banks.
Establishing A Value On The Crypto Advantage Category
Institutional investors may also be unsure of how to value bitcoin because bitcoin does not create cash flows. A variety of methods for projecting probable future values for the asset exist. By 2025, predicted valuations will vary from US$100,000 to US$500,000, based on four popular techniques of valuation:
- Gold valuation
- Stock-to-flow method
- Institutional participation method
- High-net-worth participation method
We feel that, because this is a relatively new asset class, investors should use a variety of valuation indicators, such as these, when estimating its future potential.
ESG And The Future Of Finance
Bitcoin, in our opinion, is not just a digital gold-like store of value but also a call option on the future of finance. Bitcoin, we think, opens the door to the end of decentralized finance (DeFi), allowing for the creation of new tokens, use cases, and economies. DeFi, we think, can upend the present financial system by eliminating the middleman and assisting in developing new lending/borrowing protocols, decentralized exchanges, and new markets.
However, these investments have frequently sparked ESG issues. We believe that popular conceptions of cryptos as promoting illegal behavior and being harmful to the environment are incorrect. In our opinion, we should examine the usefulness that bitcoin may give for civilizations that are suffering inflation, have unstable monetary regimes, and use risky payment methods. In the end, we believe bitcoin mining will continue to be powered by renewable energy sources, and future bitcoin purchasers will be able to purchase coins from ESG-compliant miners.
The Dangers Of Bitcoin
Provided how modern bitcoin and the whole crypto asset class are, we should be aware of the significant dangers that exist. Regulation, administration system, an advantage in areas of the environment, changes in the macroeconomic atmosphere, technological hazards, and ESG matters are all possible dangers for the strong point class, according to us.
Conclusion
Bitcoin and other crypto assets, we think, constitute a new asset class that will acquire institutional investor recognition and participation. Furthermore, we believe that specialization, sophistication, and use cases will undoubtedly increase over time (such as DeFi and non-fungible tokens). While many participants are only looking for bitcoin exposure right now, we anticipate they will want to diversify their digital asset portfolio in the future.
