- Bitcoin (BTC-USD) is showing a strong correlation with the broader market.
- Despite name recognition, real ownership of Bitcoin shows plenty of room for growth.
- With uncertainty over the dollar, Bitcoin may win the battle of “risk-off” assets.
Bitcoin (BTC-USD) is now a teenager. But rather than being rebellious, the digital currency is looking like the picture of conformity. It’s up about 5% in the last 30 days. That’s outpacing the S&P 500 Index, which is up about 3.6%. And while gold achieved a 5% gain in the last month it has since given up those gains and is basically back to where it started.
That makes Bitcoin a winner among risk-on assets. However, a 5% move isn’t indicative of the volatility that many investors have come to expect from cryptocurrencies. But that may be marking a new normal for Bitcoin. Digital currency is going mainstream.
That doesn’t mean Bitcoin will see widespread use as a medium of exchange. But if the future growth of Bitcoin takes place in a more predictable, less volatile fashion, it may mean that Bitcoin will receive a level of trust from mainstream investors.
The ‘Store of Value’ Argument Has Taken the Lead
It’s no secret that Bitcoin has higher adoption among millennial and Gen-Z investors. However, inflation has reached levels not seen for 40 years. That means that at least two generations of investors have never had to make investment decisions with an overlay of inflation.
This has led gold advocates to remind investors that precious metals offer a store of value. But now Bitcoin investors are entering that conversation. In fact, on any given day, you can see advocates for each asset present their arguments on social media.
However, while the Bitcoin versus gold argument will go on beyond this current economic cycle. What’s more obvious is that Bitcoin seems to have a better argument in the “store of value” camp.
Room for Growth
A recent survey conducted by StarkWare revealed an interesting data point about cryptocurrency adoption. A majority (53%) of respondents believed that cryptocurrency would be “the future of finance.” That number was over 60% for the 25-34 and 35-44 age groups.
And among the 25-34 age group, 28% say they have invested in crypto of some form. Without knowing the survey’s methodology for selecting participants, I can’t comment on how representative the sample is. But it is interesting to note that even with a large majority of individuals seeing cryptocurrency as the future of finance, only 28% acknowledge owning crypto.
As the survey points out, one reason some prospective Gen-Z investors may be slow to adopt Bitcoin is growing awareness of its environmental impact. There’s nothing that Bitcoin can do about that. And, by definition, that impact will be diminished once all 21 million Bitcoin are mined.
On the other hand, this may be a tremendous opportunity for Bitcoin. And the coin’s relative stability may be a key reason for that.
Bitcoin May Be Winning the Battle of Risk-Off Assets
Among the pearls of wisdom attributed to Warren Buffett is that the first rule of investing is don’t lose money. And the second rule is to remember rule No. 1.
Far be it for me to disagree with Buffett that avoiding losses should be of paramount importance to any investor. But a loss avoidance strategy has not been the reality of many investors, and particularly Bitcoin investors. After all, cryptocurrency feeds into the speculative urge that many investors have. And, for the most part, speculative investors who have held on to their Bitcoin through its big dips have been rewarded.
But that same volatility made Bitcoin an untouchable investment for some investors. Especially when there was money to be made from and endless number of stocks. And even among speculators there were a lot of cryptos that offered the chance for a “better” return.
But now investors are learning the timeless lesson that investments don’t move in the same direction all the time. And while there’s evidence that shows investors are not in full “risk off” mode, Bitcoin is increasingly looking like a safe option.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.