Posted 2 years ago | by Ben Armstrong
With the world economy slowly imploding and many countries experiencing recession, savvy investors are searching for the best performing asset. In 2019, that asset appears to be bitcoin.
The conventional investments of gold, stocks and bonds are not overly impressive. Gold was up 17 percent since Dec. 31. The Standard & Poor’s 500 Index returned 21 percent through Sept. 30. And bonds hit historic lows with the 10-year U.S. Treasury bond yielding just 1.6 percent.
Bitcoin is truly the shining star. Prices for the cryptocurrency finished the third quarter around $8,308 USD, up 114 percent on the year. This means that investors who bought on the last day of 2018 would have doubled their money, and then some.
A Rising Asset Class
Despite Wall Street’s chief criticism of bitcoin, it has gained price and could attract a new wave of investors who initially were not interested in cryptocurrency. At a recent event by Pantera Capital in San Francisco, a number of new investors contacted the firm asking for invitations.
In addition to individual investors, the year’s price gains might entice big institutional investors like pension funds and endowments, which are struggling to hit return targets.
In a report this week, Goldman Sachs ranked information-technology stocks as the best-performing sector year-to-date with a 31 percent return, noting the out-performance versus other asset classes like bonds and gold, although Bitcoin wasn’t specifically mentioned in the report.
The crypto market is still in its infancy, since big Wall Street firms aren’t yet trading digital assets in any significant scale.
Many investors first noticed bitcoin in 2017 as prices famously rose more than 20-fold, reaching an all-time high of $20,089 in December of that year.
After an abysmal 2018, bitcoin is now 59 percent off that peak. But at the current price, the digital currency is still up more than 10-fold from its level at the start of 2017’s rally. Prices have declined in recent months, from a 2019 high of $12900 in June.
One of the long-term arguments for bitcoin is that, unlike stocks and bonds whose prices are often highly sensitive to the decisions of central banks and governments, the cryptocurrency is independent of sovereign authorities. Instead, it’s governed by fixed policies that are hard-coded into the underlying network, and therefore difficult to change.
Under those rules, the supply of bitcoin is capped at 21 million, so it won’t be prone to inflation like developed-market currencies such as the U.S. dollar, euro and yen might be if their respective central banks resort to printing more money to stimulate their economies.