The Surprising Trade That’s Paid Off 88% of the Time
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You have if you were an early investor in Bitcoin (BTC).
As of this writing, investing in Bitcoin long-term has paid off 88.51% of the time from when Bitcoin first hit the scene, in 2010, to now, when BTC is pushing off its bear-market lows.
That’s a lot of green in the chart below of “Bitcoin Profitable Days” from Blockchain.com. More specifically, the chart maps out the “number of days in Bitcoin’s traded history where holding Bitcoin has been profitable relative to today’s price.”
If you or a loved one has passed up investing in Bitcoin because “it’s too volatile”…
It most certainly is — relative to what we’re used to with the Dow or most of the S&P 500 stocks.
But that very volatility — or “beta,” as an investment analyst would think of it — can be your best asset in a bull market.
And Bitcoin has now proven to be a top-tier asset in general: It’s been profitable for 4,068 days out of the last 4,596.
What is it about Bitcoin, exactly?
Well, plenty of so-called risk assets are doing quite well lately… now that the bank failures have forced the Federal Reserve to inject more liquidity into the financial system and ease off its aggressive rate-hike program. (It expects to make one last 0.25% increase this year.)
But unlike the hundreds of tech stocks, cyclical stocks, and real estate trusts — and thousands of other cryptos — Bitcoin is more than a risk asset.
It’s also a store of value. The “digital gold.” In short, a currency.
And that definitely doesn’t hurt at a time when the Fed has suddenly flipped on the money-printer switch so as to paper over the inherent flaws in our financial system.
Meanwhile, Cathie Wood of ARK Invest has been taking a victory lap. And not just because her ARK Innovation Fund (ARKK) is up roughly 25% off its low… but because she and her analysts have long preached the benefits of Bitcoin.
In their investor newsletter on Monday, March 20, Cathie Wood and her lead crypto analyst, Yassine Elmandjra, were able to declare that “Crypto Networks Are Flourishing Amid the National Banking Crisis.”
“Last weekend, when many banks were closed and others were facing bank runs, Bitcoin didn’t skip a beat,” the Ark Disrupt weekly newsletter notes. “It settled ~$33 billion, facilitated ~600k transactions, issued 2,037 new BTC at a steady and predictable ~1.8% inflation rate, attracted ~1 million new addresses, and generated $43 million for miners securing the network.”
While we’ll forgive the great Warren Buffett and his cohort for arguing back in 2014 that Bitcoin has no purpose… it’s pretty clear now that that’s not the case.
And the reality of Bitcoin’s place in the world — and in our portfolios — resulted in a 40% spike higher for BTC in just 12 days after Silicon Valley Bank went down.
After all, while traditional finance tends to reflect our own fears, greed, and herd mentality, the Bitcoin network is decentralized — operating on tens of thousands of computers around the world, with full transparency. It is not subject to the whims (and flaws) of a few economists or executives in a conference room, much less a game of telephone among the rich and powerful of Silicon Valley that leads to everyone pulling their funds from a bank overnight.
It was a rough time for all of us until the Fed rode to the rescue with its Bank Term Funding Program.
But, sadly, economic instability is commonplace in many countries. Which is why the United States is joined by countries such as Vietnam, Brazil, and Ukraine on the 2022 Global Crypto Adoption Index Top 20 from Chainalysis.
It’s clear: When the health of an economy is called into question, people start turning to nontraditional alternatives — like crypto — to protect their money.
That’s something to think about the next time an economist, regulator, or politician opens their mouth and puts the flaws of traditional finance on clear display.