Vaneck: Three reasons why you should consider investing in Bitcoin

Source: Vaneck; Compiled by: Songxue, Golden Finance

How does the Internet work? For most people, it's a bit like magic. We use it every day, but the complex science behind it remains a mystery. However, if you want to delve deeper into the inner workings of the internet, you can uncover its secrets through dedicated research. In some ways, Bitcoin is much like that - a complex phenomenon with a scientific basis. If you're curious, start with VanEck's Bitcoin and Digital Asset Education Center to explore Satoshi Nakamoto's white paper and understand the technical intricacies involved.

While Bitcoin may be younger than the internet, having emerged in 2009, it is now firmly integrated into the mainstream financial conversation. But, as a financial advisor, why should you consider Bitcoin as an investment option for your clients? In this blog, we’ll explore three compelling reasons why:

Historical Performance: A Decade of Significant Gains< /h2>

Investors often look for assets with strong performance, and Bitcoin does not disappoint. Despite Bitcoin's notorious volatility, it has still outperformed other asset classes over the past decade. In fact, it has been the best-performing asset class for eight of the past eleven years.

Let’s take a closer look at Bitcoin’s historical returns over various holding periods (ending December 31, 2023):

• 1 year: 156.62% return;

• 3 years: 50.00% return;

• 5 years: 999.77% return;

• 7 years: 5,147.10% return;

• 10 years: return rate 6,172.12%.

These numbers highlight the incredible growth potential that Bitcoin exhibits over time, making it an attractive investment for investors looking for high returns force choice.

Bitcoin has been the best-performing asset class for 8 of the past 11 years

Source: Morningstar, as of December 31, 2023. Bitcoin is represented by MarketVector Bitcoin PR USD; U.S. stocks are represented by S&P 500 TR USD; Gold is represented by S&P Goldman Sachs Gold Spot; Emerging markets are represented by Fidelity Emerging Markets TR; Real estate is represented by Nasdaq Global Real Estate TR USD is represented; U.S. bonds are represented by Bloomberg U.S. Aggregate Bond USD; Treasury bonds are represented by Bloomberg Aggregate Bond Treasury Bill TR USD; commodities are represented by Bloomberg Commodity TR USD.

Bitcoin’s scarce supply may increase its value over time

There will only be 21 million Bitcoins in existence. This supply cap is by design and one of Bitcoin’s main features.

Bitcoin’s price rises around the time of the “halving” phenomenon, which occurs approximately every four years and reduces the rewards miners receive for validating transactions by 50%. So far, halvings have occurred in 2012, 2016, 2020, and the next halving will occur around April 2024. If history is any guide,Bitcoin has the potential to perform well until 2025.

Store of Value: Digital Gold

Bitcoin’s appeal as a store of value stems from a fundamental economic concept – supply and demand. Unlike traditional fiat currencies, Bitcoin has a fixed supply cap of 21 million coins. Over time, the mining process becomes increasingly difficult, making it more challenging to produce new Bitcoins. This scarcity reflects the appeal of precious metals like gold, which is often considered a long-term store of value. As a result, Bitcoin is gaining attention as a potential digital alternative to traditional safe-haven assets. As a result,Bitcoin may be a good fit for clients looking to hedge against inflation, preserve wealth over the long term, and diversify their investment portfolios.

The Future of Bitcoin

Like any existing asset, Bitcoin is subject to Impact of demand dynamics. In 2023, Bitcoin adoption will grow significantly as it becomes more mainstream. Now, more than ever, merchants and businesses are accepting Bitcoin as a form of payment, and the infrastructure is being built to make it more convenient for ordinary people to use Bitcoin. The development of user-friendly wallets, exchanges, and markets has removed the technical barriers to entry that existed in Bitcoin’s early years.

Institutional investors’ interest in Bitcoin has also increased. Hedge funds, asset managers, and endowments are increasingly recognizing Bitcoin’s potential as a store of value and an effective portfolio diversification tool, especially when viewed through the lens of an uncorrelated asset with the potential to hedge against inflation. With approximately $50 billion worth of Bitcoin currently held by ETFs, countries, public and private companies, the approval of a spot Bitcoin ETF will only increase Bitcoin’s appeal.