The value of Bitcoin to the U.S. Dollar is having another upswing as $1.9 trillion in new federal spending ramps up. While some are mystified as to the price fluctuations related to Bitcoin, one only needs to look at the rising debt that U.S. taxpayers are on the hook for to see why it is rising. Bitcoin is not for the faint of heart as the price fluctuations are dramatic and if you are a long-term investor believing the price will rise, then be mentally prepared for some deep valleys in your quest for high valuations.
While Bitcoin’s price to the U.S. Dollar is up almost 600 percent over the last year, it is also helping those who invest in Bitcoin via the stock market. There are expanding vehicles to take part in Bitcoin via companies that are involved with Bitcoin and also via trusts and ETFs. One example is the Grayscale Bitcoin Trust (GBTC) which is traded over the counter is up 30 percent year to date and up 412 percent over the last year.
Some find it easier to buy via the stock market as they feel buying Bitcoin directly is too complicated. Other easy avenue to take part in investing in Bitcoin are via the Robinhood app and PayPal. These apps make it easy to buy and sell Bitcoin and other crypto currencies. They also offer free education on what cryptos are and how they work.
Kiplinger recently tackled how much Bitcoin should an average investor have in their portfolio. According to their Black-Litterman model they set up, the average investor should start off with .5% of their portfolio in Bitcoin. However, Kiplinger points out that if an investor has a high confidence, the value of Bitcoin will outperform other investments over a long period of time, then up to 10% is warranted.
Libertarians originally envisioned Bitcoin as an alternative currency to the U.S. Dollar (fiat currency). If you look at a paper dollar bill from the U.S. Treasury, one will see that it is actually a promissory note backed only by the faith people have in that paper note. That said, early adopters of Bitcoin did not like it to be compared to the U.S. Dollar or other world currencies.
Over time, Bitcoin has become more a store of value, like gold and silver, though since it is digital it is not something one can physically touch. The reason for the creation of Bitcoin was because all fiat currency eventually must end and the recent meteoric rise of Bitcoin’s price to the U.S. Dollar has been in relation to the U.S. Government obligating the U.S. taxpayer for trillions in unfunded liabilities which has accelerated over the last year. Some see Bitcoin as a strong hedge against inflation, which many see coming sooner rather than later.