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2021 Is The Greatest Investment With Bitcoin

2021 Is The Greatest Investment With Bitcoin

So as the year 2020 comes to a close and we start to look to 2021 it of course raises the question of how should we be investing right now based on how markets economies and technologies are evolving and so to that end we'll ask the question is bitcoin.

The best alternative asset for investment in 2021, Bitcoin is many things to many people but Depending on their circumstances and opinions about what bitcoin is today and what it could become in the future, why they choose to hold bitcoin. 

So let's start talking about the difference between return and risk in order to start exploring the validity of bitcoin as an investment in 2021.   

Economists' Yale study examined whether the returns of digital assets, specifically bitcoin, ether, and ripple, behave like the returns of other asset classes, traditional currency stocks, and commodities of precious metals. 

The return behavior of all digital assets, including bitcoin, could not be explained on the basis of their analysis by risk factors that account for returns in stock currencies or precious metal commodities or by macroeconomic factors rather economists discovered that.

The performance of bitcoin is driven by specific cryptocurrency factors, such as the momentum effect and proxies for average and negative investor attention. what the momentum effect means is that an asset is likely to continue increasing in value if it's already just increased in value and what that means is that bitcoin's price and the sentiment surrounding bitcoin.

I think in 2021 that is definitely something to pay attention to because global investor sentiments, well it does have an impact on bitcoin's price but bitcoin has distinct underlying fundamentals that are not affected by the health and economic situation created by the pandemic.

Compare that to traditional economies and economics where we have demand shocks or the decline in consumer demand for goods and services due to lock downs and unemployment.

We have supply shocks or production limitations and supply chain shutdowns and the ensuing policy response by governments and central banks be that quantitative easing or record low-interest rates and on the other hand bitcoin's fundamentals and utility are not directly affected by a decline in profitability or production or an increase in the money supply and instead these headwinds may increase the attractiveness of an investment in bitcoin, i think investors are taking note.

Some people don't think that detracts from its value especially as its narrative is still emerging you see in the early days of bitcoin's existence events and sentiment affecting traditional markets had little to no impact on bitcoin's markets and bitcoin's trading infrastructure was completely independent of traditional market infrastructure and bitcoin's ability to react to current events affecting traditional markets in real-time.

So it was limited because bitcoin's trading was not integrated into traditional markets but as the infrastructure has matured participants in bitcoin markets and traditional markets have started to overlap.

This is why we've seen so much noise about institutional investors now being able to trade bitcoin futures and options on the same platform they use to trade derivatives of other assets.

 At the same time retail investors can now buy and sell bitcoin on certain platforms that allow them to trade stock, and I think this is one of the most important things to note because as bitcoin matures and the profile of market participants in bitcoin expands to include more participants from traditional markets.

As Kathy Wood from Arkanvest said, that most individuals have an overallocation of bonds relative to where they should be, they can not all go into equities, and people are thinking about inflation to begin with, bitcoin could become more correlated with other assets, increasing its overall value. so it'll be very natural for bitcoin to absorb some of the money flowing out of bonds. 

I think this is something very important to consider because as bitcoin's narrative becomes more consistent as it proves to stand alone from the fiat money system well that's where i think bitcoin really shines as an investment i think a quote from Chamath really highlights this.

For me, Bitcoin is the only thing I have seen so far that, due to every other asset class, equity debt, real estate commodities at the end of the day is very essentially uncorrelated to the decision-making mechanism and that decision-making body. 

Well, they're all tightly coupled to a legislative framework and an interconnectedness in the financial markets so you see bitcoin is unique in that it continues to be influenced by retail investor sentiment and can capitalize on the shift in the way that retail investors interact with traditional markets and consume financial information.

So i think this is one of the best reasons why bitcoin could continue to serve as a portfolio diversifier if not being the best investment in 2021 because bitcoin's fundamentals are relatively shielded from the economic impact of the pandemic as its functionality is not predicated on profitability or production and bitcoin is natively digital.

I really believe the simple explanation as to why bitcoin is the best investment in 2021 is that it simply does not fit into any defined asset categories, making it the ultimate alternative asset as bitcoin grows and matures and as investors study its features as institutional investors and retail investors really begin to get on board.. 

It might open the door for helping bitcoin mature into an independent asset class, that i think is the most important narrative surrounding bitcoin in 2021  bitcoin is not just an alternative asset or investment anymore.

It is an alternative asset class that stands alone and above many others, bitcoin is a unique investable asset with compelling differences relative to traditional asset classes and i think in 2021 with the way economics is developing there's nothing better you could ask for.

So what do you think do you think? Bitcoin is the best investment in 2021? do you think bitcoin is maturing what do you think is going to happen next year and how are you planning for it.

Yulina Firmansyah
Yulina Firmansyah Hi, I am a wife who really loves crypto and blockchain technology, I am a writer for this blog.

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