Is Bitcoin the current best investment option?
Ten years ago, if you ask which asset has the best return? The answer is none other than Bitcoin if it can be regarded as an asset. From December 2010 to February 2021, the price of Bitcoin has risen from 26 cents to more than US$56,000, with a cumulative return of over 11 million and an annualized return of 217%, far exceeding the target return of the 500 Index (13.9%) and USD bonds (AGG, 3.8%) for the same period.
So, the question is, with such an excellent performance, can it become a serious consideration for investors and be included in the asset allocation portfolio? What are the reasons to support Bitcoin as an asset choice?
The biggest reason for support comes from the supply of Bitcoin, which is a total of 21 million units. Since the total supply is capped, Bitcoin acts like gold, where no one can create more Bitcoin out of thin air, and its amount is getting lesser with more mining. This feature is completely opposite to the banknotes issued by the central banks of all countries.
In the paper money era, the central bank of any country can print and issue banknotes without restrictions to meet its monetary policy goals. The 2008 financial crisis made the world realize about the power of quantitative easing in the money printing. The central bank’s money supply in the form of hundreds of billions of dollars has firmly held bond yields near zero, while pushing up the prices of assets such as stocks and real estate.
In fact, every time there is a financial crisis, the response strategy of the government and the central bank seems to be nothing more than printing money to solve the problem, and the scale is getting bigger every time. Will such an operation trigger a higher price level or even hyperinflation? Will it cause systemic risks? The limited supply of Bitcoin is very special in this context, providing an effective hedge to deal with the investment risks caused by the government’s abuse of money. Data from the past three years show that Bitcoin price does have a negative correlation with the value of the U.S. dollar, showing that Bitcoin can provide a certain hedging function when the U.S. dollar depreciates.
In addition to the value of inflation hedges, Bitcoin also provides the value of cross-border payments and capital transfers. If more people and institutions accept Bitcoin, then we may achieve cross-border payments and transfers at zero-cost, a disruptive revolution to the global banking system. The prospect of this application alone can make Bitcoin a hot asset. Since Bitcoin is not a stock or a bond, it can reduce the volatility of the investment portfolio and increase the ratio of the investment portfolio.
In summary, there are two reasons why Bitcoin has become a popular choice. (1) It has fixed total amount, which can hedge against inflation. (2) It can carry out cross-border payments and capital transfer. Although Bitcoin is currently popular, it has been more than ten years old. The growing price made most people look back, but this alone is enough to stop most people. In fact, the number is constant and there are still many projects that can hedge against inflation. As another hot project in 2020, the NGK has a constant value of 1 billion, and it promises never to issue more. At present, the team has pre-mined 60 million units as seed funds and unlocked addresses, and the remaining 940 million units are mined through block generation. Secondly, the NGK provides a perfect solution for cross-border payments. The first step is the establishment of a global trading system. Although it sounds grand, this is not only the mission and vision of NGK, but also an inevitable requirement of NGK as an ecological circulation token. The second step is to build a USDN stablecoin system. The stablecoin USDN is an important existence in the NGK business ecosystem with extraordinary significance. It is not only the connection among various NGK tokens, but also a bridge linking the traditional business and the blockchain world. It is also a transaction tool for solving the cross-border payments. The NGK tokens and the stablecoins USDN complement each other to form a lubricant for the entire business ecosystem of NGK, driving the huge engine of NGK forward. With that, the problem of cross-border payment becomes trivial.
With that, we can see a clear trade-off: If you want to increase the return of your investment portfolio through Bitcoin, you must accept its high price, but such a price is obviously unacceptable for most individual investors. difficult to make people. While the emerging project of NGK, with its high yield and long-term ecological development, provides more choices for most ecological builders.