Why Bitcoin may be worth another look now that the bubble’s burst and its price has settled down
By Arthur Salzer
One of my first brushes with Bitcoin was in May 2017 and I had just finished a TV interview at the SALT Conference (the world’s largest hedge fund conference) held at the Bellagio in Las Vegas. Two of the serving staff walked up to me and asked, “What do you think about Bitcoin? We are thinking about buying some.” At the time, the price of BTC was in the US$2,000 range, but there were some eerie parallels with the dot-com bubble around the turn of the century. I told them, “While I have not invested any of my own or client capital into this sector, some of my friends who have been in since the $100 range, have been selling on a regular basis to reduce the position size recently. I can’t give you more advice than that.”
We all know now that the cryptocurrency bubble burst last year, with the price of BTC, which briefly peaked at more than US$19,000 near the end of 2017, bottoming out at a little less than US$3,200 12 months later. With prices back above US$10,000, the question for many now is whether Bitcoin is more like the Amazon.com Inc. of this era or another Pets.com. The truth is that Bitcoin is open source software and is more akin to the internet, so it’s a mistake to compare it to a company or a stock. Indeed, the chairman of the U.S. Securities and Exchange Commission has publicly said Bitcoin is not a security.
The more appropriate question is whether Bitcoin is an asset class to consider as part of a diversified portfolio?