The report by Fidelity Digital Assets explains Bitcoin’s benefits as a store of value and explores the potential of the leading cryptocurrency in light of its scarcity and volatility
US investment giant, Fidelity Investments’ cryptocurrency arm, Fidelity Digital Assets has published a report on Bitcoin and its utility as a store of value. Titled, Bitcoin Investment Thesis: An Aspirational Store Of Value, the July report outlined the rise of Bitcoin and its ability to continuously attract new investors, due to its digital scarcity and the benefits of its volatility.
Fidelity Digital Assets was launched in 2018 and has since specialised in providing cryptocurrency services for large institutions. Though it was initially launched for the US, the company is now expanding to Europe amid the growing demand for virtual assets.
“Bitcoin is the most significant innovation in finance since the Medicis invented double-entry accounting,” the report quoted Brian Kelly, the CEO of digital investments firm BKCM,” the report stated.
“An analogy is that investing in Bitcoin today is akin to investing in Facebook when it had 50 million users with the potential to grow to the more than two billion users it has today,” the report went on.
“This is driven by the idea that Bitcoin offers asymmetric upside. If Bitcoin is widely adopted by retail and institutional investors as a store of value, the upside may be substantial relative to the initial upfront investment,” the report explained.
It was also acknowledged that gold is still the undisputed favourite among traditional investors. Bitcoin’s market share as a store of value is significantly less than that of the precious metal. However, the report anticipated that Bitcoin’s position could dramatically improve once masses realise the benefits and features of digital currency.
“Most people in the world don’t yet see Bitcoin as digital gold. As soon as people see it in a different way, the price will adjust.” John Pfeffer from Pfeffer Capital L explained.
According to Fidelity’s report, digital scarcity is the key factor that attracts investors towards Bitcoin. With only a predetermined supply of 21 million coins, Bitcoin offers scarcity, portability, durability and divisibility. Its scarcity, in particular, protects the depreciation of the digital currency in the long run. Furthermore, the limited quantity of the asset makes it impossible to counterfeit, the report explained.
Bitcoin’s volatility has often been presented as a feature that repels traditional investors. However, Fidelity states that the cryptocurrency’s volatility is one of its best selling points. The report claims that many users initially learn about Bitcoin because of its volatility and that, high fluctuations could “attract investment, development, and innovation”.