Crypto: Bitcoin less risky than traditional financial assets?

Volatile, but persistent, bitcoin has always negotiated its place between opportunity and risk. However, the rhetoric of cryptocurrency detractors has not stopped it from being installed in more than 41 million wallets around the world. Subjected to the test of inflation, the COVID pandemic and the relentlessness of global regulators, bitcoin is undergoing a historic transition. It was once associated with risk, volatility, scams and big losses. Now, the digital currency that is giving central banks a hard time is measuring itself against its peers in the traditional financial market. The analytical company IntoTheBlock has carried out a study of the main financial instruments on the market. The results are breathtaking. You will never let go of your bitcoins again.

Flagship crypto’s 30-day volatility drops 50%

If bitcoin has always been known for its violent fluctuations, the price of the cryptocurrency seems to have calmed down in recent months with rather moderate movements. Compared to last year, its 30-day volatility decreased to 15.47%, a drop of almost 50%.

Likewise, alongside technological assets or other traditional assets, cryptocurrency displays relatively low volatility, even close to that of gold. To what do we owe this reduction in the risk potential of BTC ? Has cryptocurrency entered a new phase of maturation as a financial asset? What is certain is that it is a very good indicator for the growth of global adoption.

This year, despite the prolonged downtrend and falling metrics, the number of BTC wallet addresses with a non-zero BTC balance has increased. According to a report from Glassnode, the number of BTC wallets containing at least 1 BTC exceeded one million on May 13, 2023. But, bitcoin has more surprises.

Bitcoin more reliable than famous traditional assets, study finds

On October 11, the analysis company IntoTheBlock published the results of its study on the relative reliability of the main financial assets on the market. Keep quiet. In the lot, bitcoin ended up with the highest Sortino ratio, at 0.57. You may like to know that the instruments evaluated included the Nasdaq 100 and the S&P 500, the US Dollar Index (DXY), etc.

For those who are unfamiliar with the Sortino ratio, it is a widely used ratio in the world of traditional finance. It is used to compare the return on financial assets to their downside risk, particularly for portfolios with high volatility. The higher this ratio, the more profitable the investment, because the remuneration obtained will be greater than the risk taken by the investor.

It is therefore curious to note that BTC finds itself with a ratio significantly higher than that of several traditional financial assets. Furthermore, the same study revealed negative Sortino ratios for certain traditional financial assets. This means that whoever invests his resources in these assets will not even be able to get a reward for the risk he took. For bitcoin, this is rather good news.

Is bitcoin becoming a savings product like any other?

When we analyze the journey of bitcoin, we are tempted to say that it is now one of the best savings products. Indeed, in 2019, the cryptocurrency was only worth 4,000 US dollars. At the time of writing this article – October 2023 – its price is around $26,700.

Some traders will certainly talk about the episodes of falls and liquidations that have occurred at various times since 2019. We will still remember that the value of the crypto has increased from 4,000 to 26,700 dollars in 4 years. This equates to growth of 667.5% over this period.

How many traditional financial assets are capable of achieving such performance with the pandemic, galloping inflation and the global economic crisis having characterized the 2019-2023 period? Even with the impact of the bankruptcy of the crypto exchange FTX on the cryptocurrency ecosystem, bitcoin has proven to be very resilient.

We may therefore be tempted to assert that this cryptocurrency presents less risk and is more profitable than most traditional assets in the long term. And if this is the case, the Dollar Cost Averaging (DCA) strategy would be the best approach to investing your savings in bitcoin.

Indeed, the DCA method consists of purchasing, at regular intervals and for a constant amount, a specific asset, regardless of its current value. This investment strategy helps smooth out risk over time and overcome panic linked to short-term price fluctuations.

Above all, the DCA method makes investment more accessible and allows you to build up assets more quickly. So, if you want to grow your savings in the long term, define an amount of BTC to buy each month, quarter or half-year and then start buying. If predictions of a $148,000 bitcoin come to fruition, your savings will generate a return of over 500%. How many traditional assets can offer this performance?

BTC ETF Demands and BTC’s Reputation as a Savings Product

One of the main barriers to the official adoption of bitcoin as a savings product is the non-accessibility of the cryptocurrency through the main traditional channels. Fortunately, this state of affairs is being corrected.

Indeed, the recent wave of requests for approval of Bitcoin ETFs could give cryptocurrency a place among savings products. Remember that, among the applicants, we find BlackRock, an investment fund which manages nearly 9,500 billion in assets.

The interest of these giants of the financial system will boost the demand for BTC, its legitimacy and its accessibility via traditional finance channels. So, keep your bitcoins safe. They could soon eclipse traditional assets in your portfolio.

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