Bitcoin: an Alternative Asset for Diversified Portfolio Management

Bitcoin: an Alternative Asset for Diversified Portfolio Management

Bitcoin, Explained

Where did bitcoin come from?

So who controls Bitcoin now?

How does it work?

Characteristics

The Pizza Purchase

Advantages to the Bitcoin network

  1. It’s independent from governing authorities. Bitcoin as a currency cannot be debased or hyper-inflated because of its limited supply. No entity can increase transaction fees, and there is no intermediary in control of the money.
  2. It’s highly portable. It’s digital, meaning you can store massive amounts of money on a device as small as a flash drive, or even stored online. All you need is internet access to view your account, make a payment, or send currency to somebody else.
  3. You can choose your transaction fee. There is no commission to an intermediary who facilitates the transaction. Rather, with Bitcoin, you choose your own transaction fee or none at all. If you choose none, however, miners likely won’t validate your transaction. The fee gives them the incentive to share their computer processing power. The higher the fee you choose, the quicker the processing time.
  4. It reduces the chance of counterfeiting to near-zero. To solve the ‘double-spend’ problem, the Bitcoin network uses an enormous amount of computational power. Blockchain technology and BTC’s various consensus algorithms have been designed to counter the all-too-familiar problem of fraudulent transactions in the digital world.
  1. There is no unified consensus on its legality. What is really lacking is a unified definition and framework for bitcoin. But governments around the world can’t come to any agreement. You see bitcoin taxed differently from one country to the next. Some countries are embracing it and others are banning its adoption altogether.
  2. It still needs further recognition and adoption. Many still perceive cryptocurrencies and blockchain technology as too complex to understand. This makes crypto assets, in general, seem unapproachable to the masses, and is one of the factors hindering mass adoption. Another is the lack of merchants accepting bitcoin as legal tender. Then you have the legal scrutiny and regulatory uncertainty that comes with issuing and possessing digital assets.
  3. You can lose the keys to your wallets. With any cryptocurrency wallet, you and only you are in control of your funds. There is no intermediary to help if you lose your private keys or fall victim to online fishing schemes, trojans, or malicious malware. You are your own bank, and if you don’t protect yourself, you can lose entire wallets.
  4. It’s still a volatile emerging asset. Speculation has had a lot to do with the price volatility of bitcoin and other cryptocurrencies. Take the crypto crash of 2018 for example. Bitcoin went from an all-time high of approximately $19,000 USD down nearly 70% of its value just several months later. There were a lot of factors to this, from government scrutiny, standardization, and regulation; to bitcoin trading more like a commodity, with its price inflated by limited supply and increased demand. (Which can only last so long before the bubble bursts.)

How Can Bitcoin Be Used For Portfolio Management?

The Key Takeaway

With the right management, some bitcoin in a portfolio can not only improve a portfolio’s overall performance but also reduce its overall risk.

--

--

--

The Rodman Law Group specializes in business, cannabis, cryptocurrency and blockchain technologies, securities, and intellectual property law.

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

PREAMBLE

Why Tokenized Projects Are Building on Bitcoin

Syscoin News Update #86

Building Rome(Octaplex Network Update Series): Episode I — Dies diem docet

June Nano Community Project Award

Impossible Friends Exclusive – Ouro Beta Test Group

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
The Rodman Law Group

The Rodman Law Group

The Rodman Law Group specializes in business, cannabis, cryptocurrency and blockchain technologies, securities, and intellectual property law.

More from Medium

Note 12. Balancing on Risks: To Be or Not to Be?

Grayscale Threatens SEC With Legal Action Over Repeated Spot Bitcoin ETF Rejections

The Crypto Queen: Najah Roberts Bringing Nuggets to Vegas in Digital Financial Revolution Tour

Turning Toxic Waste From Roadmaking Into Bitcoin and Ethereum