In a groundbreaking report, Fidelity Digital Assets, a subsidiary of the world’s third-largest asset management company, has underscored the distinctive value of Bitcoin in the cryptocurrency investment landscape.

The firm, which manages a staggering $4.24 trillion in assets under management (AUM), has shown a bullish stance on Bitcoin (BTC) and is deeply committed to the cryptocurrency-centric investment domain.

The report, penned by Chris Kuiper and Jack Neureuter, suggests that Bitcoin stands apart from other digital assets and should be evaluated on its own merits. “Investors should adopt two distinct frameworks when considering investments in this digital asset ecosystem,” the authors noted.

Elaborating on these frameworks, the authors explained that the first framework delves into the inclusion of Bitcoin as an emerging monetary commodity. In contrast, the second framework contemplates the addition of other digital assets that exhibit venture capital-like characteristics.

The report further posits that Bitcoin is best understood as a scarce monetary asset, with its primary value proposition being a store of value. Unlike other digital assets, Bitcoin was designed primarily to address the issue of digital scarcity and to establish a form of digital currency that is resistant to censorship.

The authors argue that no other blockchain is likely to surpass Bitcoin’s status as a monetary commodity since any modifications would necessitate trade-offs in decentralization or security. “Bitcoin is currently the most secure and decentralized monetary network,” they emphasized, “thus excluding other networks that compete in different use cases beyond money.”

The report also sheds light on Bitcoin’s resilience, bolstered by a phenomenon known as the “Lindy effect.” This principle suggests that the longer a technology has been around without becoming obsolete, the longer it is likely to remain in use. Bitcoin’s ability to withstand threats and attacks has only strengthened its position in the crypto economy.

Kuiper and Neureuter further highlighted two robust driving factors behind Bitcoin’s returns: the global growth of the broader digital asset ecosystem and the potential instability in traditional macroeconomic conditions. Compared to other crypto assets, the returns on Bitcoin come with lower associated risks.

On the other hand, non-Bitcoin digital assets reportedly exhibit higher risks and offer returns more akin to venture capital investments. “Allocations to non-Bitcoin tokens are typically made with a venture capital-like mindset,” the report stated.

Given Bitcoin’s unique risk and return characteristics, the report concludes that cryptocurrency investors should evaluate Bitcoin as a monetary asset separately.

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Filed under: Bitcoin - @ October 12, 2023 2:05 am