Since its inception in 2009 Bitcoin (BTC) has overcome many obstacles. From being priced at US$ 2 in November 2011 to recently crossing the US$ 50,000 mark, it’s been a thrilling journey, to say the least for this game changer cryptocurrency.
One of the biggest challenges for Bitcoin has perhaps been in winning the confidence of traditional investors, most of which have consciously stayed away from investing in BTC up until recently. Their lack of confidence has mainly stemmed from Bitcoin’s non-regulated and highly volatile nature.
Is Bitcoin a good investment option for traditional investors in 2021?
For years, investors have parked their money in traditional investments like stocks, bonds, gold, or real estate – all considered to be more ‘secure investments’. It’s only recently that individual investors have shown an active interest in owning digital assets.
While most investors have begun to ride the Bitcoin wave, a few are still concerned with the validity of the cryptocurrency as a legitimate investment option and whether it’s actually safe to invest in. Meltem Demirors’ statement best explains this predicament, the Chief Strategy Officer of CoinShares says, “Our research has found that in a traditional 60-40 portfolio, a 4% allocation to Bitcoin balances the reward as well as the risk of drawdowns.” It comes as no surprise that financial giants, institutional investors, and even traditional retail investors have started exploring investments in Bitcoin.
6 reasons for traditional investors to invest in Bitcoin now
- Limited Supply – Bitcoin’s supply is limited. Its source code restricts the total number of available tokens to no more than 21 million, of which 18.65 million have already been mined so far. This is considered to be the prime reason behind Bitcoin’s current rally. As the demand for Bitcoin continues to exceed with a limited supply – its price is on the rise. Many investors have vocalized their regret of having missed the chance to invest in Bitcoin earlier, calculating that they would have earned much higher returns than what they have through traditional investment channels. However, as financial experts say – if the perfect time to buy Bitcoin was yesterday, the next best option is to allocate now!
- A Global Pandemic and its Aftershocks – Bitcoin’s limited supply is the precise reason why, unlike fiat currencies, its value has remained unaffected during the pandemic. Struggling economies worldwide had to over-print their respective fiat currencies in order to manage the economic slump brought upon by COVID-19. As a result, they lost their value in the global financial market. Investors far and wide, too, started losing faith in the mainstream assets they usually purchased. These circumstances have worked in favor of Bitcoin investment, enabling the cryptocurrency to become more widely accepted among retail investors. Inigo Fraser-Jenkins, Co-Head of Portfolio Strategy at Bernstein Research, thinks that policy amendments at Government levels post COVID-19, debt levels, and diversified investment options have also made investors change their mind towards Bitcoin.
- Institutional Bitcoin investors Have Come Forward – Institutional investors find Bitcoin investing to be one of the best investment options of the 21st century. Big names like Ark Invest and Horizon Kinetic to Rothschild Investment Corporation, have all jumped onto the Bitcoin bandwagon. Companies like Square Inc, MicroStrategy, and Mass Mutual have also used their balance sheets to invest in Bitcoin as well.
- Wall Street Investors Backing the Digital Currency – Bitcoin’s record-breaking rally is driven, to a large extent, by the massive influx of Wall Street billionaires who have publicly backed the cryptocurrency since 2020. This has gone a long way in boosting the confidence levels of unsure retail investors. Stanley Druckenmiller and Paul Tudor Jones have invested in Bitcoin, and have also stressed the cryptocurrency’s potential as a hedge against inflation.
- Pension Plan of Forward-looking Investors – Bitcoin is on a roll this year. Since the beginning of 2021, it has recorded price hikes of more than 90% and has earned returns that are comparably unheard of in traditional investment records. Looking at the present situation, venture capitalist Jeremy Liew is hopeful that Bitcoin could be worth a mammoth US$ 500,000 per token by the year 2030. Many traditional investors have added small portions of Bitcoin to their wallets, and are now unphased by the occasional ups and downs or the usual volatility that surrounds these cryptocurrencies, instead they’re confident that the investment can prove to be a successful pension scheme in the long run.
- Mode of Payment for Major Businesses – Major companies worldwide are now accepting Bitcoin as payment, be it retail giants, fast food chains, travel houses, or fashion houses, the list goes on. Tesla Inc. made the most unexpected announcement this week, Elon Musk, proprietor of the luxury car company said that Tesla customers can now buy their cars with Bitcoin. Bitcoin is definitely on its path to soon being acknowledged as a mainstream payment method worldwide.
The Bottom line
There is no time better than the present to invest in Bitcoin. If it’s anything that the early adopters of this cryptocurrency can teach us, it is that their return on investment has truly been unprecedented. It’s about time that traditional investors overcome their Bitcoin skepticism.