Bitcoin Regains Traction
Modern societies depend on big intermediaries, like banks and government, as trusted, centralized points of entry and exit for consumer money during trade. But when trust was lost in the wake of a financial crisis in 2008, a virtual currency was released that cut intermediaries out of the trade loop. The digital cryptocurrency, Bitcoin, fulfilled the need for a cross-border monetary system that was independent of futile institutions.
Bitcoins are virtual stores of wealth, purchased using traditional currency. They can be passed person to person electronically and in real-time using technology that is inherently decentralized and pseudonymous in nature. Originally, Bitcoins were worth pennies to the dollar, but steadily gained interest during times of falling USD and Chinese Yuan. In 2010, 2011, 2012 and 2013, Bitcoin was the world’s strongest currency, outperforming even gold.
Value of Bitcoins in circulation hits record high of $14bn, according to The Guardian
The appeal of Bitcoin comes from the exposure that is harbored from the currency’s production. Every Bitcoin transaction must go through a blockchain series that safeguards the virtual currency from hackers and publishes each transaction across millions of computers. Although the idea seems a bit like science fiction, many investors are fond of the currency’s unprecedented independence from a nation or a bank and its complete transparency. Bitcoin liquidity has also steadily grown as a result of decreasing volatility. Its daily price volatility is now comparable to oil. Jonathan Perkinson, who leads the Deloitte’s global Blockchain initiative, said that “ trade finance is going to completely move this way, and the real deal becomes how fast the sector can align with Bitcoins.”
Emerging markets have been particularly quick to make the switch to Bitcoins due to a combination of unstable currencies and projected financial crisis. Despite its pseudonymous position, the cryptocurrency has also been gaining more legitimacy with policymakers in the U.S. after the Commodity Future Trading Commision classed Bitcoin as a commodity last year.
In addition to its utility function as the future of leger payments in trade finance, Bitcoin serves as a modern store of wealth. In today’s global economy, there is a lot of fear surrounding traditional safe haven assets like gold and bonds. These traditional assets are buckling under the weight of centralized institutions. A few symptoms of this are the demonetization efforts in India, that have made thousands of bank notes inactive, and the working-class push for Brexit and Trump. These political anomalies foreshadow changing times in the economy and investors are finding solace in similarly disruptive asset classes. Bitcoin essentially functions as a direct hedge against uncertainty. No wonder in the second week of December, the price of a single Bitcoin touched a three-year high, surpassing the $800 mark for the first time since 2014. Much of this growth comes from traders in the U.S., Europe and China, who remain skeptical of their native currencies.
Bitcoins represent the market’s appetite for alternative investments in non-traditional asset classes. The cryptocurrency is joined with other exotic assets as the new stores of wealth to compete with a fleeting bond market. Change is underway in the global economy and alternatives are the modern investor’s best resource for hedging risks in the stock market.
Technological advances in the financial sector have cultivated innovative investment opportunities with unmatched accessibility and transparency, and Bitcoin is just one. Unparalleled transparency is also offered by Arthena’s investment platform, which uses public auction sale data to invest in the most liquid parts of the traditionally opaque art market. After investing, users can access real-time performance updates of each fund on the Arthena website. Request a white paper here.
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