Sustainable Investments: How Bitcoin Can Offer Portfolio Insurance

Bitcoin image of stocks on a computer

Bitcoin continues to defy the odds and prove it is here to say. Despite the criticism from some big names like Warren Buffet and Jamie Dimon, Bitcoin is amongst the most sustainable investments.

In fact, Bitcoin recently battled back to over $50,000. It dropped below this price threshold multiple times this year but never gave in to the bears.

Consider the return on investment (ROI) on bitcoin this past year. Its 52-week low is less than $10,000. This means bitcoin owners had a 5x multiplier on their initial investment.

Read on to learn how bitcoin can offer portfolio insurance for your traditional stock holdings. Explore how investing in bitcoin can hedge against declines in the stock market.

 

 

Why Do You Need To Hedge?

Historically, the United States economy and the stock market cannot continue at this pace. While the 2020 coronavirus pandemic technically put the United States in a recession, it was short-lived.

In the third quarter of 2020, the economy recouped almost all of its losses. Gross Domestic Product (GDP) grew by more than 33% in a single quarter.

The economic decline was even shorter in the stock market. Besides for a one-month period from February to March 2020, the stock market continues to press forward. Currently, the Dow Jones is near record-highs despite the continued presence of Covid-19.

Even a rookie trader knows that the stock market is cyclical. The next sustained decline in the three major stock indices is a matter of when and not if.  

What Is the Major Economic Risk?

In order to keep the United States economy afloat, the federal government took extraordinary measures. The national deficit projection for fiscal year 2021 is more than $3 trillion. The total government debt is rapidly approaching $30 trillion.

At the same time, the Federal Reserve continues to keep interest rates at record lows. The Fed continues to pump capital into the economy despite the long-term implications.

The U.S. credit rating remains at an AAA status, however, agencies are assigning a negative outlook moving forward. The nation’s debt posture is viewed by financial experts as unsustainable in the long term.

What Does This Mean for Bitcoin?

Bitcoin and other digital assets stand to benefit. As a decentralized digital currency, there is no government entity or central organization behind it.

When traditional currencies like the U.S. dollar or Euro are under duress, investors can turn to Bitcoin instead. Bitcoin is unaffected by declining credit ratings and unsustainable debt projections.

While the dollar loses value, bitcoin continues to rise and gain acceptance in mainstream society as a form of currency. As such, Bitcoin is an effective insurance policy for your portfolio against threats to the macroeconomy.

Does Bitcoin Belong With Other Sustainable Investments?

Over the past decade, Bitcoin has proved its sustainability time after time. In spite of high-profile critics, hacks, and other negative news, Bitcoin continues to rise.

Bitcoin investors are seeing enormous ROI in a short period of time. Their gains far outpace the ROI of traditional stock holdings.

If you are interested in digital asset investments, contact us today to speak with a specialist.

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