CoinShares: "Bitcoin Is Like a Risky Tech Stock"

August 12, 2020   Bitcoin

Behaving like a tech stock means Bitcoin carries the same high risk and high reward opportunities as a fledgling startup. Bitcoin acts more like a tech startup stock than digital gold — with investors reaping big rewards if it works but potentially losing everything if the crypto asset fails.

That’s the conclusion of an Aug. 10 report from digital asset manager CoinShares titled A Little Bitcoin Goes a Long Way. In it authors James Butterfill and Christopher Bendiksen argue that the fact Bitcoin (BTC) “starting its life at a price of zero” gave it a stellar reputation.

“If it reaches its potential, the value could be immense,” the report stated. “At the same time, there is a non-zero chance that it fails entirely, leaving the value of Bitcoin close to zero.”

Unlike many experts who suggest setting aside 1% of a portfolio for cryptocurrencies, CoinShares suggested investors allocate “just under 4%” for Bitcoin alone.

The firm tested Bitcoin as a reliable store of value by seeing how the cryptocurrency performed as part of a balanced 60/40 portfolio. It’s analysis indicated that the token enhanced annualized returns by 9.7% starting from 2015, almost double comparable assets.

Beginning to mature into store of value


Behaving like a tech stock is no bad thing. Since the crypto bloodbath in March, tech stocks have gained enormous ground. The price of Amazon rose 70.7% to $3,170, Apple rose 63.3% to $450, Facebook 54.5% to $263, and Google 23.6% to $1,496.

The report comes after a period of volatility with Bitcoin testing the $12,000 threshold for the first time since 2019. 

“Bitcoin is an asset in its infancy,” the Coinshares report states. “As Bitcoin matures, its robustness is further proven, and its risk of failure moves further and further away from zero, we believe investors will start treating it differently, leading its macroeconomic behaviour to follow suit.”

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