This brings us back to the value of scarcity. “In the case of bitcoin, there are no buildings, no inventory, no assets, so value can evaporate instantaneously.”
“When a company liquidates, they can at least sell buildings, inventory, and recoup some assets,” Desai added. That’s helped make bitcoin’s fair value hard to pin down. Unlike a stock, for example, which has its intrinsic value tied to expectations of future cash flows, bitcoin isn’t tied to any underlying fundamentals. “Bitcoin is finite and fiat,” said Viraj Desai, senior manager, portfolio construction at TD Ameritrade Investment Management, LLC.* “There’s a fixed supply of bitcoin, and its value is derived from what buyers of bitcoin perceive it to be.” Visit the bitcoin futures page for more information.īefore deciding where cryptocurrencies might fit into a diversified portfolio, let’s take a step back and define what we’re talking about. Perhaps it’s time to ask: “Does crypto have a place in my portfolio? Will it help me pursue investment diversification?”īefore exploring the topic, it’s important to note that, as of 2021, bitcoin futures are the only cryptocurrency product available to qualified TD Ameritrade clients on the thinkorswim platform, and not all clients will qualify. Payment systems, including Square (SQ), PayPal (PYPL), and more recently Visa (V) have turned their attention toward crypto. Institutional interest in bitcoin continues to accelerate in 2021, from the likes of BlackRock (BLK) and Tesla (TSLA), in addition to several prominent fund managers. And when the price of bitcoin surged through the $40,000s in early 2021, the message looked to be clear: Cryptocurrency may have been down, but it was far from out.īy many standards, the crypto market continues to mature. This build-out quietly continued through the steep drop in 2018 and the volatility of 20. Meanwhile, the financial community has taken note, building platforms and exchanges for cryptocurrency products. The technology behind bitcoin and cryptocurrencies looks adaptable to numerous industries, including banking, retail, legal, health care, and others, leading to billions of dollars of investments in research and infrastructure. Fast-forward to today, and more than 4,000 other cryptocurrencies have joined the markets, with a collective market cap of $1.3 trillion as of February 2021. The cryptocurrency market is maturing, although still quite volatileĬryptocurrencies could potentially be considered a viable alternative investment for portfolio diversificationĪccording to legend, it was a little over 10 years ago when a person or group operating under the pseudonym Satoshi Nakamoto logged the first entry into the bitcoin ledger.
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