Bitcoin hasn't become what it was originally created for yet. But with the crypto becoming more and more mainstream by the day, the chances are that the pace of Bitcoin's universal adaption will gain some traction as well.
For now, it's booming as an alternative trading asset. And contrary to what many traditional investors who rely upon tangible assets like land and commodities or the stock market think of crypto’s current boom (that it’s just a temporary bubble), this investment asset is here to stay for a long time.
And it brings more to your portfolio than just the novelty of a unique asset.
Bitcoin and Your Investment Portfolio
It’s true that you can’t treat Bitcoin as a traditional investment asset, nor does the crypto market has much overlap with the stock market. But that doesn’t mean Bitcoin doesn’t offer you the same things that other assets do.
There are two common types of diversification investors pursue to ensure the safety of capital and to protect against market fluctuations and corrections: Diversification of assets and diversification within the same asset class.
Bitcoin offers you both. Let’s say you have a portfolio composed of real estate, stocks, bonds, and the safe-haven metal, i.e., gold. Each investment asset has its own strengths and weaknesses, but apart from stock, all of them are relatively “static.” So a lot of your rapid growth will be tied to stocks. That might inevitably force you to choose risky and volatile stocks.
But Bitcoin offers a smarter alternative. By adding a growth-oriented and relatively volatile stock, you can diversify your portfolio without disturbing one of your asset classes too much. And crypto investments offer diversification within the asset as well. You can choose from thousands of different cryptocurrencies.
Rapid growth is crypto’s forte, especially Bitcoin’s, and it’s even more prominent in the long-term. A simple example is Bitcoin’s five-year growth. If you had invested in Bitcoin exactly five years ago and held on to it, you would have seen over 8,600% growth, which is extremely rare in the stock market or any other assets, especially in that time frame. And that’s not even the peak of its growth. If you had sold it when it hit $40,000, you’d have seen 10,000% growth.
One good strategy can be to buying Bitcoin when it hits rock bottom and sell a part of your stake at each peak. It might not help you realize the top gains but would keep your investment relatively safe and would still outshine probably 90% of the stock market.
Do you know why investors love gold, especially when the market is turbulent? Because of its negative correlation to the stock market. The price of gold shoots through the roof, usually when the stock market is down. But it also makes it a less-than-ideal holding when the economy and the stock market are strong.
Bitcoin is different. Even though it doesn’t track the stock market and doesn't necessarily peak when the stock market is at its lowest (the current peak is the evidence since Bitcoin peaked after the market recovered), and its growth cycles are independent of the stock market. This allows you to realize gains even when stock investors are experiencing losses, and it's also a considerable diversification plus.
Bitcoin can transform your portfolio for the better, but it’s also important to note that thanks to its volatility, it can also weaken your portfolio, especially if a significant part of your portfolio is made up of Bitcoin.
But with the right investment strategy, the yuanpay group site login or platform to invest/trade crypto, and the right mindset and asset allocation, adding Bitcoin to your portfolio will have significantly more upside than the downside potential.