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Here’s Why Bitcoin Deserves a Place in Your Portfolio

Bitcoin deserves a place in your portfolio irrespective of what ‘smart’ conservative money managers would have you believe. Bitcoin is a disruptive technology because its creates a new market in how financial transactions are handled. Bitcoin also has the potential to disturb the traditional monetary system and eventually displace money (fiat currency) as we currently know it.

Of course, it wouldn’t be wise to sell all your assets to buy Bitcoin or to put all of your investment in Bitcoin; yet, you’ll be doing yourself a major disservice if you refuse to join the bandwagon of early adopters who are investing in the potential of Bitcoin. This article provides insight into some of the reasons why you should endeavor include Bitcoin in your portfolio in order to reap the benefits of diversification.

1. Bitcoin is not a passing fad

Many products and services often come into limelight with a tag for being “disruptive”, only for them to fizzle out of existence after a couple of years. Bitcoin is not a passing fad and it is here to stay. To start with, Bitcoin (built on Blockchain technology) imbibes the very essence of the most disruptive 21st century technologies. Bitcoin has a mobile-first approach, it is open source, it facilitates peer-to-peer transactions, focused on privacy, and encrypted with cryptography. No other financial/monetary product is fortified with all the technologies that give Bitcoin its unprecedented level of usefulness and security.

2. Bitcoin has direct application across hundreds of markets and industries

Many people erroneously assume that Bitcoin is only useful for sending and receiving payments when you don’t want to go through banks. The assumption is reinforced by the fact that Bitcoin was the choice payment system for questionable transactions on places such as Silk Road. Nonetheless, Bitcoin could compete with fiat currencies for direct applications in a wide variety of markets. Bitcoin has direct applications in the $1 trillion e-commerce market, the $515B annual remittance market, and in the $2 trillion annual e-payment market among others.

3. Tech and finance heavyweights already support Bitcoin

Bitcoin is still in infancy and it’s adoption is still a long way off from gaining traction in the mass market. Nonetheless, Bitcoin is already getting rave reviews of heavyweights in the technology industry. Paul Buchheit who founded Gmail has opined that “Bitcoin may be the TCP/IP of money.” Bill Gates, founder of Microsoft says Bitcoin is “a technological tour de force.” Richard Brown, an executive at IBM notes that “Bitcoin is a very sophisticated, globally distributed asset ledger.”

 Heavyweights in the finance sector have also lent their voice to support Bitcoin. For instance, top-tier venture capitalists such as Peter Thiel, Marc Andreessen, and Fred Wilson have invested in the technology.

4. Bitcoin’s adoption is on an uptrend globally

Bitcoin might still be in infancy but its adoption shows a predominantly upward trend globally. The U.S. government is already toeing the path of acceptance and regulation for Bitcoin in the U.S. Bitcoin has earned the title of digital gold in Germany. The adoption of the cryptocurrency has grown rapidly in China and India in response to some of the monetary policies of the government. Available data shows that in Q1 2016, there were more than 13 million Bitcoin wallets to account for a 60% year-over-year increase. More so, the hashrate on the Bitcoin network was 1,028 pth/s to mark a 300% year-over-year increase.

Bitcoin’s Disruption: Conflicting Opinions

Acknowledging the Disruption of Bitcoin

Since Bitcoin’s creation in 2009, financial professionals have considered the new technology a threat to financial services.  The financial services industry moves, trades, stores, lends, and accounts for money.  In an article published by McKinsey and Co. Don Tapscott points out that each of these practices are challenged by Blockchain technology.  Tapscott was not alone in recognizing Bitcoin as potentially disruptive to financial services.  As visualized on the below Google Trends graph, Bitcoin attention has spiked since 2013.


The disruptive nature of Bitcoin spurred public attention.  From 2013 to the present, major consulting firms such as Deloitte and McKinsey have issued reports on Bitcoin’s disruptive nature, with specific interest in the underlying Blockchain technology. Financial firms, such as Goldman Sachs and Morgan Stanley, are seeking to understand Bitcoin and employ tools such as the Blockchain, which is evidenced by their reports over the same period.

The consensus remains that Bitcoin is a potentially disruptive force. The effect of Bitcoin, and in particular Blockchain technology, may extend beyond the financial services industry.  This article examines professional, conflicting opinions regarding this disruptive reality.

Professional Opinions on Bitcoin Disruption

Paul Krugman: In December 2013, Paul Krugman wrote an article for the New York Times, “Bitcoin is Evil.” In his piece, his first qualm with Bitcoin is that it fails as a store of value.  Unlike gold or USD, it has no floor of value.  This criticism alone seems insufficient to label Bitcoin “evil,” but he proceeds to identify Bitcoin disruption as a threat to infrastructure, using a quote from Charlie Stross.

“Bitcoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind- to damage states ability to collect and monitor their citizens’ financial transactions.”

Krugman’s critique of Bitcoin technology is understandable, particularly in the wake of the Silk Road, which shed light on horrible illegal transactions, facilitated through the use of Bitcoin.  However, I believe he overlooks the benefits associated with the efficiency of a decentralized system.

Blythe Masters: The decentralized nature of Bitcoin that Krugman dislikes has inspired confidence and investment from Blythe Masters, economist and former executive of JPMorgan Chase.  Masters, recognized as a developer of credit default swaps, has invested time and money into the development and re-purposing of Blockchain technologies.  In a 2015 interview, she highlighted Blockchain technology’s ability to reduce risk as a motivator for her transition into the FinTech industry.  Her faith in Blockchain technology led her to acquire the CEO position at Digital Asset Holdings, a Blockchain technology company providing settlement and ledger services.  Master’s faith has not been misplaced.  Digital Asset Holdings opened a London office in January 2016, and hired eight new executives as of August 2016.