Given the dramatic rise of Bitcoin (BTC) from its lows of just over $5,000 on 17th March 2020, to over $28,800 on 30th December 2020, there has been considerable interest in the ‘Big Daddy’ of cryptos.
Whilst Digital Bytes is not authorised to offer financial advice (nor was it established back in March 2018 to focus on the ‘ups and downs’ of cryptos), the topic of digital currencies is what we receive the most questions on and is the most popular of all our social media postings. There is, without doubt, much uncertainty as we approach 2021 what with massive corporate and government debts. Yet equity markets are still riding high, despite the economic outlook of a weakening US$, rising unemployment figures and the global repercussions from the impact of COVID-19. It is therefore no surprise that BTC is hitting new highs as we see more and more corporations investing in BTC as part of their treasury management, believing that BTC represents a diversification of risk from a potential declining US$. The demand for BTC from individuals and corporations helps to explain the 8- fold rise in the size of assets in the Greyscale Bitcoin Investment trust.
Greyscale Bitcoin Investment Trust
Source: TCharts.com
It has been a great year for those managers at Greyscale who have been charging 3% p.a. simply to hold BTC for Greyscale’s investors, although they have magnanimously agreed to reduce their management fee to 2.55% which, based on the value of the fund on the 30th December 2020 OF $16.1billion it will generate over $400million in management fees p.a.!!!
The reality is that no one knows for sure when to buy or sell any assets unless they have inside or price sensitive information. However, there is a tried and proven way to obtain this access, especially to an asset whose price is as volatile i.e. ‘zig zags’/ go up and down as much as BTC has done in the last 10 +years.
Results of regular savings into Bitcoin
Source: DCABTC.com
The secret is easy - regular savings every week or every month. Simply allocate say the same amount every week, buying more BTC when the price falls and less when its price rises. By having followed this simple strategy over the last three years and saved $10 every week, the $1,570 saved would now be worth $5,737 a rise of 265 %. As to whether it is too late to buy BTC, who knows, but one thing is for sure - the price of BTC seems not to be linked to traditional economic activity. Therefore, if you are looking to diversify your investments then maybe 2021 is the year to do something about it?
