Investors Are Approaching Bitcoin Entirely Wrong

when they are used in staking, for instance in a proof-of-stake process, or as a tool for the provision of liquidity, by most traditional metrics, these programmatically promised yields are often considered a far cry from the contractual obligations that most investors are used to when it comes to fixed income.

In return for taking the risk that the issuer of a bond never makes good on the principal, the bondholder receives an annual coupon payment . Yet such assertions also ignore the fact that bond yields are far from stable, the coupon may be, but the actual yield, catering for demand, supply and inflation, is what investors care about and that almost never is.of the coronavirus saw yields plummeting , as demand for haven assets soared.Credit: Unsplash

Ultimately, earnings are most closely tied to value creation and while there can be no doubt that the bulk of demand for cryptocurrencies at this current stage of their evolution is speculative, that’s not to say that demand for them will not one day be associated with their use to derive value from services rendered by the blockchain, whatever those services eventually evolve to become.

While the correlation between stocks and bonds is weak , the pandemic has tested this assumption, with stocks and bonds trending in the same direction at almost every juncture. Which would explain its appeal to some big Wall Street names, including the billionaire macro hedge fund manager Paul Tudor Jones, who has said publicly that he aims to hold about 5 per cent of his portfolio in Bitcoin.Because the history of Bitcoin is limited, focusing on its ability to hedge against inflation is to miss the forest for the trees.

Bitcoin has also had too short a lifespan to be properly measured up against inflation because until fairly recently, in the period after theAs such, Bitcoin’s comparison with gold as an inflation hedge is inconvenient at best and misleading at worst. While a fool is often derided as someone who knows the price of everything but the value of nothing, anyone assessing the “investable” nature of Bitcoin needs to don the cap of the fool because that is precisely the skillset necessary to profit from the cryptocurrency.It’s important to distinguish between cash-generating assets that can be both valued and priced, and collectibles that can only be priced.

Source: Digital Coin News (digitalcoinnews.net)

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