Deciphering the Bitcoin Investment Case

Bitcoin turns 17 years old in January. But for newer investors, there’s still considerable need for demystification around the investment case for cryptocurrency and the role asset class can play in well-balanced portfolios.

One thing is clear: ETFs such as the Coinshares Valkyrie Bitcoin Fund (BRRR) are making bitcoin more accessible to advisors and retail investors. They are bringing a slew of new market participants into the crypto fold. Moreover, ETFs like BRRR make crypto more approachable for novice investors while making it easier for them to be buy-and-hold investors. Ease of access is one of the pathways into the store of value conversation, which has long been a source of debate around bitcoin.

“Bitcoin emerged as an alternative to government-issued “fiat” currency, that is currency not backed by a physical,” noted U.S. Bank Wealth Management. “Given Bitcoin’s limited supply and the decentralized blockchain ecosystem driving it, investors hope that higher cryptocurrency prices result from growing Bitcoin demand.”

Other Elements in the Bitcoin Investment Case

For investors considering BRRR or direct bitcoin holdings, the store of value conversation looms large, but there are other points to consider, including the concept of value-added growth. That’s applicable throughout the crypto universe, including with ethereum, the second-largest digital currency, and other proof-of-work coins.

“Other crypto assets offer investors cash flow the application generates. In either approach, investors seek to capitalize on more than the asset’s price appreciation, uncovering potential fundamental value not unlike stock and bond investments,” added U.S. Bank.

Another essential element — one BRRR investors should evaluate — in the broader crypto investment case is impact of blockchain technology. Put simply, blockchain is foundational tech on which crypto operates and expansion of its use cases could bolster the fundamental case for some of the more credible digital currencies, such as bitcoin and ethereum.

“Blockchain technology critical to digital assets requires tangible assets such as data centers, computer chips and other specialized hardware,” observed U.S. Bank. “That creates potential investment opportunity in pick-and-shovel investment that seeks to leverage, through more tangible investments, cryptocurrency’s rising popularity.”

Still, allocation challenges linger. Said another way, many investors don’t know how much of their portfolios should be directed to crypto. Advisors can help solve that riddle, and it’s an endeavor ETFs like BRRR can ease.

“Crypto does not currently have a place in a traditional asset allocation mix. Much of this is attributable to crypto’s limited historical track record. That makes it difficult to determine a specific role for crypto in a well-diversified portfolio,” concluded U.S. Bank.

For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.