Bitcoin – Is it a Safe Asset?
Bitcoin is an Unpredictable Asset
In a MacroMania blog, David Andolfatto, Federal Reserve Bank of St. Louis Vice President speaks about bitcoin. He said that it can be unstable and it is not something that will give a stable rate of return. Andolfatto said that bitcoin on the other hand possess some significant safety properties for policy making and personal investing.
3 Reasons Why Bitcoin can be considered as a Safe Asset
Reason #1 – Bitcoin is Reliable on Uncertain Economic Times
A safe asset is something that people run to in uncertain economic condition. It was proven that Bitcoin like Gold is the one people turn to whenever there is an economic crisis in their countries, it is due to the fact that bitcoin can be traded into goods and services and that there are many businesses nowadays that is accepting bitcoin as a payment method. Aside from that, you can transfer bitcoin anywhere in the world. You can send money to your love ones using bitcoin without any fees at all.
Reason #2 – Bitcoin Inflation-Deflation Characteristic
This Cryptocurrency can be considered as a safe asset because it is designed to up to a certain amount of coins only. This is to protect its value. Therefore, the bitcoin value with not suffer deflation, thus it is safe to keep.
Reason #3 – Bitcoin Value Increase Over time
It is the next big safe asset considering its value. It is increasing over time, though there is no telling that it will remain the same throughout the years, but you can still consider it as a safe asset because you’ve got more to gain than to lose when you invest in it.
Some people who are not considering Cryptocurrency are confused and have a little knowledge about this digital currency. They find it complicated because it is new to their ears. But people don’t need to understand its technicalities but knowing how it works will suffice.
There is a block size debate that is ongoing today with bitcoin about the need to finance the cost of its bookkeeping. Even if it happens, it can still be considered as a safe asset and smaller investors can still invest into it. You can expect lower returns in a long run and a high return when a crisis happens.
You can also consider cyrptocurrency as a simple asset just like fiat currency because it acts the same. Fiat currency fluctuates, but we keep it, gold values fluctuate, why not keep Cryptocurrency? It is safer than the two. In fact, Cryptocurrency might replace money in the future, so it better be safe than sorry. You can invest with bitcoin and learn how to take advantage of it. You can keep both, fiat currency and Cryptocurrency so when the time comes that traditional money is no longer of value you already know how to manage bitcoin.