Store of Value or Currency? On top of these unfortunate events, the question I've been asking for several years about crypto remains unanswered: Are cryptocurrencies like Bitcoin actual currencies or merely stores of value? That is, can we use them to actually buy and sell things? Or are they just an investment, akin to a stock or a work of art? Well, they're not currencies as far as I can tell. Because there's not much you can buy with them. Sure, we've all heard that carmaker Tesla (Nasdaq: TSLA) accepted payment in Bitcoin. So then, how much did a Tesla cost in Bitcoin? Bad question. Tesla vehicles were always priced in dollars or other fiat currencies. So if in March 2021 you wanted to buy a Tesla Model S, you merely paid in the Bitcoin equivalent of the dollar price. The same went for the Dallas Mavericks NBA team. In an attempt to endorse Bitcoin, the team announced in 2019 that it would accept Bitcoin for both game tickets and merchandise. But if you wanted a Mavs jersey or hat at the arena, you had to get the Bitcoin-dollar spot exchange rate and then pay the Bitcoin equivalent of what the item cost in dollars. Apparently, Mavericks owner Mark Cuban liked Bitcoin but was unwilling to risk his own dollars on Bitcoin's crazy volatility. Some endorsement! So really, Bitcoin and its crypto brethren are more of a store of value. So the idea is to invest a small amount in some tokens today and reap huge rewards when they eventually overtake the dollar, the yen and the euro. Except, well, see above about the value of Bitcoin et al. last year... Alternative to Other Asset Classes (Like Stocks and Bonds) Finally, Bitcoin and other crypto were supposed to be a nice addition to a portfolio because, as a unique investment that's not associated with any other asset class, they would add diversity to a portfolio. Except that didn't work out either. For the last several years, cryptocurrencies have moved in tandem with tech stocks. Check out this price chart of Bitcoin and the NYSE FANG+ Index going back to 2018. The FANG+ Index tracks 10 megatech companies, including Microsoft (Nasdaq: MSFT), Facebook owner Meta Platforms (Nasdaq: META), Apple (Nasdaq: AAPL) and Google parent Alphabet (Nasdaq: GOOGL). The Bitcoin price seems to track the movement of big tech stocks, though in a more volatile and exaggerated way. That makes it the rough equivalent of a highly leveraged FANG ETF - just what every investor needs in their portfolio! So there you have it. The many benefits of crypto, laid out for all to see. Invest wisely, Matt |
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