Financial services giant Fidelity is making the case for Bitcoin (BTC) as a strong investment despite BTC’s recent tumble from a November all-time high above $69,000 by more than 50%.
In a new report, the firm cites two key reasons why investors should assess Bitcoin separately from all other cryptocurrencies.
“Bitcoin’s return profile is driven by two strong tailwinds: the growth of the digital asset ecosystem and the potential instability of traditional macroeconomic conditions.
These return tailwinds are likely to be captured in an easier way with less risk than via the majority of other digital assets.”
While Fidelity stresses the reason behind making a distinction between Bitcoin and the rest of the nascent asset class, it does think BTC’s competitors have important roles to fill.
“Bitcoin is fundamentally different from any other digital asset. No other digital asset is likely to improve upon Bitcoin as a monetary good… [but] the rest of the digital asset ecosystem can fulfill different needs or solve other problems that Bitcoin simply does not.”
The report also notes that when it comes to stability and security, the decade-plus-old Bitcoin has already passed the test.
“It is arguably the least likely protocol to encounter a major bug at this stage in its life given it has existed longer than any other project, holds an intentionally simplistic code and has a now $1 trillion bounty for anyone capable of exploiting it.”
The second key reason behind Fidelity’s praise for Bitcoin lies in its ability to act as a hedge against inflation.
“The increasing use of monetary and fiscal policy as a way to provide support for ongoing economic growth may give rise to concerns about the overall stability of the financial system and the ability for the economy to stand on its own.
These types of macro environments have historically tended to benefit scarce assets whose supply cannot be altered.
Bitcoin’s rule set, historical precedents, and decentralization have created the greatest level of scarcity of any digital asset protocol. This makes a compelling case as the greatest available hedge for some of the potential headwinds facing the legacy financial system.”
At time of writing, Bitcoin is up 1.29% and trading for $38,846. It’s risen 16% from a monthly low of $33,520 on January 24th.
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