What’s the Significance for Investors?
Even if the volatility in Bitcoin and the broader cryptocurrency landscape gradually diminishes, does that alone make Bitcoin a worthwhile investment?
What factors, then, should be considered?
From an investment strategy perspective, our Model Portfolio Solutions team emphasizes several compelling reasons to consider Bitcoin for long-term investment. These include its potential role as a unique digital safe haven and an alternative global currency4, a buffer against the dominance of the US dollar and geopolitical risks, and a way to participate in the ongoing digital shift of goods and services – accelerated by the generational transfer of wealth from Baby Boomers to Millennials5. In combination, these attributes may offer distinct and valuable sources of risk-adjusted returns and diversification benefits to traditional diversified portfolios.
Dive Deeper…
Since its inception in 2009, the Bitcoin6 blockchain has successfully processed well over a billion transactions7 and weathered numerous crises that could have ended its existence (various media outlets and industry observers have prematurely declared Bitcoin “dead” hundreds of times8).
Despite this remarkable durability, Bitcoin frequently encounters confusion and skepticism. Understanding Bitcoin requires effort, and its value proposition can take time to fully grasp.
Even defining Bitcoin precisely can be a challenging task today9. It doesn’t easily fit within traditional financial frameworks.
At its core, Bitcoin is a digitally-native, bearer asset10 that leverages sophisticated embedded mechanisms to transfer value across the internet, circumventing traditional banking systems, geographical boundaries, regulatory hurdles, and high costs, while offering speed and impartiality.
The appeal of this value proposition is undeniable.
But there’s more to the story. Bitcoin boasts a pre-defined and immutable monetary policy encoded into its very foundation (particularly relevant given growing national debts and excessive government spending). Its supply is also exceptionally unresponsive to changes in demand. Unlike gold, often used as a comparison, Bitcoin’s supply cannot be increased to meet higher demand.
While many are aware that Bitcoin has a predetermined schedule for issuing new coins until the year 2140, with a maximum supply of 21 million tokens11, fewer recognize that the actual available supply is likely significantly smaller. Conservative estimates suggest that between 3 and 4 million Bitcoin are visible on the blockchain but are permanently inaccessible (and therefore removed from circulation) due to lost, forgotten, or destroyed private keys12.
To illustrate the limited availability of Bitcoin, if every millionaire in the United States were to request just one Bitcoin from their financial advisor, there would not be enough to fulfill the demand13.
Bitcoin’s decentralized architecture makes it resistant to unauthorized interference, including censorship from corporations and governments. While these powerful capabilities can be misused, many are slowly (and sometimes reluctantly) considering the possibility that the potential benefits outweigh the risks, as is the case with most groundbreaking innovations.
In Conclusion
Critics often argue that Bitcoin lacks intrinsic value. Conversely, we believe the inherent characteristics discussed represent authentic and compelling sources of intrinsic worth, which we anticipate will be increasingly recognized across the globe – especially in a world characterized by high debt levels, digital-first strategies, and growing dependence on AI.
The iShares Bitcoin Trust ETF is classified as a non-investment company and is not subject to the same regulatory compliance requirements as traditional investment companies registered under the Investment Company Act of 1940, such as mutual funds or ETFs.