Can Bitcoin Improve Portfolio Performance?
Bitcoin has become so attractive as an investment asset that millions of people are now buying cryptocurrency. Within just 13 years, Bitcoin has become so massive and influential in the economy. We have seen El Salvador and the Central African Republic adopting Bitcoin for official use. Most of these Bitcoin trading platforms operate like Bitcoin Prime Software, supporting users in online trading.
What is Bitcoin?
Bitcoin is a buzzword. The word ‘Bitcoin’ floods the internet and mass media outlets making it more familiar to people worldwide. Bitcoin is a cryptocurrency or digital currency. Consider it as a type of virtual currency that you can use to transact. However, unlike fiat currency, Bitcoin doesn’t exist in physical form.
Additionally, Bitcoin differs from fiat money in terms of decentralization. Conventional fiat currency is centralized, meaning that the government, often through the central bank, controls it. The government can print and release more money, determining the amount in circulation and inflation. Bitcoin is different.
Being a decentralized digital currency, Bitcoin is not under the control of the government or any other single entity. Users can mine, buy, and sell Bitcoin through blockchain technology without a third party. More importantly, Bitcoin is a digital asset different from traditional investments like bonds, stock, and gold.
Bitcoin trading is a growing trend. Users now have access to many trading platforms to buy, sell, and exchange their Bitcoin.
Bitcoin In Your Investment Portfolio
Bitcoin is a unique asset class. Unlike traditional assets like bonds, stock, or gold, Bitcoin is still new. And this means that not so many people understand it, and even fewer have included it in their investment portfolio. Additionally, cryptocurrencies are generally highly volatile, with prices fluctuating unpredictably daily.
Despite its newness and high volatility, many investors are investing in Bitcoin. Bitcoin’s uniqueness as a digital asset makes it attractive to investors. The price volatility of Bitcoin is one of the unique factors. Many investors are investing in Bitcoin because they expect the prices to rise. When the price rises, they can then sell for a profit.
However, keener investors don’t sell their Bitcoin just because the price has jumped. Such investors often hold the Bitcoin, knowing its value as an asset increases as the price grows. So, if an investor buys Bitcoin today, his Bitcoin value will grow with time.
Bitcoin can improve your portfolio performance. For one, the value of Bitcoin has generally continued to grow since its inception. Today, the value of a single Bitcoin has grown by a significant margin, and many people expect it to grow in the future. And this implies that Bitcoin can improve your portfolio performance by increasing its value immediately and over the long term.
Several studies reveal the positive impact of Bitcoin in boosting portfolio performance. A survey by Iconic Funds, a crypto-asset management company, suggested that holding just one percent in cryptocurrency can increase returns across different portfolios. Similar findings came from another study by Bitwise. In this study, a 5% allocation of Bitcoin in your portfolio eight years ago would have doubled returns on any traditional portfolio.
Final Thoughts
Bitcoin is an attractive but also risky type of asset. Despite the volatile price and uncertainty, you should probably allocate about 5% of your portfolio to Bitcoin. That way, you will be sure that your portfolio performance will increase. Bitcoin’s value continues to grow at a higher rate than traditional assets. And this is among the reasons Bitcoin can have a significant positive boost to the overall performance of your portfolio.
