Many people are jittery about Bitcoin as it is experiencing quite lot of swings up and down and is highly volatile – which is not digestible for typical investors. So a better way to decide is by thinking about whether it adds value to the existing assets that you are holding.
Right now, I feel bitcoin has the highest safe-return ratio of all investments!! – Yes, that is a very bold statement. So I am increasing my position compared to other asset classes. For my reasons for investing in bitcoin at all, please see my article from last year. Here is why I am increasing my position – because every other asset class raises some concerns in the current market context.
Equity: We can clearly see that equity has done an overrun – it is overpriced and the crash is likely to come soon. Many investors are already aware of this. People are chasing equity because there are no real returns in bonds. Maybe Indian equity could do well (due to demographics, the political model and unleashing values – money moving from non-performing asset classes to performing asset classes as an effect of de-monetization), but in US and Europe, I think we should be aware that it is doing its last mile run! For Indian equities I like finance companies(as they will be the harbingers of bringing offline cash to the digital economy) in the current context.
Bonds: It makes absolutely no sense to invest in bonds, when you are getting sub 1% p.a. and people have still chased them speculatively as central banks are lavishly buying them. So beware, there is a bust in the waiting, which will massively impact equity and world currency markets as well.
Currency: There has been a lot of quantitative easing all over the world, and that is still not reflected properly in currency pricing. Tight monetary policies and loose fiscal policies increase the underlying currency values and vice versa. So imagine how the euro could survive – or any economy that is not doing any fiscal spending but has loosened its monetary policy – for very different reasons! There are many countries whose currency is at risk – see how much money is moving out of some of the large nations.
Gold and silver: This is definitely a good asset class, used as the main transaction model during difficult times. But moving it into digital form is a bit of a challenge. So it might not be as interesting as bitcoin – as bitcoin carries all the real reasons for gold investment, and at the same time makes transactions at microlevels possible.
Context: Bitcoin is at a very nice tipping point and priced cheaply. Equity, bonds and fiat currencies are overpriced in today’s market context… would you buy tomatoes at 10 cents/kilo or 10 dollars/kilo? In fact, I am also increasing my positions in a few other altcoins.