When it comes to analyzing the bitcoin price, I'm going to drop a major truth bomb: I can't give you a purely unbiased opinion. Although I aim for evenhandedness in all my articles, I can't help but believe in the cryptocurrency sphere's long-term potential. As a result, some of that enthusiasm will inevitably color my assessment.
But here's the deal: no one else can provide unbiased opinions on the bitcoin price, either. The cryptocurrency concept rattles Wall Street and our capitalistic system like nothing else. Because the markets for digital tokens are largely decentralized, no single entity can control trading, or impose basic foundations, such as a time schedule.
The mainstream financial sector doesn't really care about decentralization, per say. What they're concerned with is that they're not getting their piece of the pie . Neither the IRS nor the SEC give a hoot about protecting investors; they just want their tax revenues and they'll be happy as a clam.
Furthermore, I can't help but notice that the rise in "bitcoin stocks" is self-serving. The idea here is to not bother with cryptocurrency assets; instead, buy companies like Advanced Micro Devices, Inc . (NASDAQ: AMD ) and Nvidia Corporation (NASDAQ: NVDA ) which the "blockchain industry" benefits.
Of course, if you do buy AMD or NVDA shares, the IRS and SEC won't complain.
These companies follow the system, and as a result don't attract controversy. More critically, they directly and indirectly participate in our economy. But the one of the reasons why the bitcoin price soared last year was because bitcoin is outside the system. Essentially, it has its own economy, which establishment institutions hate.
Although I don't have anything against bitcoin stocks, I view them as the opening act to the main show. Bitcoin is by far the superior bet. Let me explain:
Volatility? What Volatility?
Look up any investment-related article about the bitcoin price and without fail, you will hear the term "volatility."
Disclaimer and disclosure laws are largely responsible for this trend. Publishers are trying to cover their hind end, and we all respect that. The other part is that it's the truth! We've all seen the wild, daily bitcoin price fluctuations with both humor and dread. It's an adventure, to say the least.
But what if I told you that cryptocurrency volatility is an overplayed and exaggerated concept?
Remember that I said that no one can provide a purely unbiased opinion. My good friend once said that opinions are like orifices (he's referring to the one not publicly seen): everybody has one. We're all opinionated creatures, and that will never change.
Regarding the bitcoin price, it is volatile, but usually from a biased perspective. When you look into the longer-term picture, that stereotype changes mighty quickly.
Since the second quarter of 2013, the bitcoin price declined only five times on a quarter-to-quarter basis. While that's considerably more than the two losses suffered in the SPDR S&P 500 ETF Trust (NYSEARCA: SPY ), it's not horrendous.
Furthermore, I argue that the original cryptocurrency is much more stable than many suggested bitcoin stocks. For example, AMD produces crypto-mining specific GPUs and so it's somewhat correlated with the bitcoin price. However, AMD has suffered seven quarter-to-quarter losses during the above timeframe.
I must also point out that since Q3 2015, bitcoin has enjoyed 11 consecutive quarters of growth. The vaunted SPY, on the other hand, is riding on eight consecutive quarters. I believe that the perception of bitcoin volatility mostly refers to its growing pains.
Now that the digital markets are maturing, the cryptocurrency is genuinely more stable.
Nothing Beats the Power of the Bitcoin Price!
But if the mainstream media insists on pounding the volatility of the bitcoin price, it's only fair that they consider the benefits of said volatility.
Click to Enlarge Consider this: If you put in $100 into the SPY ETF during Q2 2013, you would have approximately $187. That's not a bad way to invest a "Bennie," considering that the SPY is as vanilla as you can get.
On the other hand, if you had invested $100 in one of the bitcoin stocks - say AMD - you would get back roughly $350. Again, a solid return on a relatively small amount of money.
However, if you were fortunate enough to plunk that money down on bitcoin, you would have over $9,700! Let that sink in for a moment.
People talk about bitcoin volatility as if it were a negative. However, history has demonstrated that with patience, bitcoin and other cryptocurrency assets can skyrocket small initial investments to the moon. You can't say that about benchmark ETFs or even bitcoin stocks.
Granted, bitcoin has an existential risk factor that virtually all other investment classes don't have to deal with. So while I believe the math is convincing, the floor could be ripped out from underneath me. That's the chance you'll have to take as an investor.
But please, don't buy into the myth that a negative report on the bitcoin price is an objective one, nor that bitcoin stocks are necessarily stable plays on the blockchain. Everybody has a vested interest in where cryptocurrencies end up. My recommendation is to look at the facts. When you do, I strongly believe we'll generally share the same opinion.
As of this writing, Josh Enomoto is long bitcoin.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.