Bitcoin Still King: Investors Should Separate It From Other Digital Assets

Despite a recent pullback, bitcoin remains the largest cryptocurrency, boasting a market capitalization of $708.18 billion as of the end of February 3.

As seasoned crypto investors know, the dominance and success of bitcoin has prompted dozens of other digital tokens to hit the market over the years. To be precise, there are now 9,341 different digital coins, including bitcoin, according to Coinmarketcap.com.

That’s a staggering number, and it’s large enough to imply that many constituents in this space aren’t as relevant as the bigger players, such as bitcoin and ether, among others. Along these lines, some market watchers argue that bitcoin, from an investment perspective, should be separated from the rest of the pack. This could shed light Grayscale Bitcoin Trust (GBTC).

“Bitcoin is best understood as a monetary good, and one of the main investment theories for bitcoin is as a store of valuable assets in an increasingly digital world,” according to Fidelity research. “Bitcoin is fundamentally different from any other digital asset. No other digital asset is likely to improve bitcoin as a monetary good, because bitcoin is the safest, most decentralized and most secure digital currency (compared to other digital assets) and any “improvement” necessarily face compromises.

This sentiment underscores the long-term potential of GBTC. the the index fund has $23.39 billion of assets under management, as of February 3, and tracks the CoinDesk Bitcoin price index.

Adding to the relevance of GBTC is that it is an efficient and secure way for investors of all stripes to gain initial exposure to digital assets. From there, they can explore other cryptocurrencies and the potential usefulness of those assets in their portfolios.

“Investors should hold two distinct frameworks when considering investing in this ecosystem of digital assets,” Fidelity adds. “The first framework examines the inclusion of bitcoin as an emerging monetary good, and the second considers the addition of other digital assets that exhibit venture capital-like properties.”

Another trait in favor of GBTC is rarity. As in, there will only ever be 21 million bitcoin tokens mined, and in reality, even when that number is reached, the supply is likely to be much lower as some are locked behind lost passwords. This limited supply adds credibility to Bitcoin’s monetary policy.

“One of the biggest characteristics of bitcoin’s properties is its scarcity. Not only is bitcoin rare (bitcoin’s current inflation rate of 1.8% is roughly equal to the right now), but unlike gold, it’s also obviously finite,” Fidelity concludes. “There will only ever be 21 million bitcoins. No other digital asset has an immutable monetary policy at the bitcoin level. In other words, bitcoin’s monetary policy can be considered the most credible.

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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.