Bitcoin: Higher ROI than commodities?

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Over the last two years, anyone paying attention to Bitcoin and other cryptocurrencies will have noticed how well they’ve performed when compared with equities and commodities alike. In particular, Bitcoin has delivered a higher return on investment than both oil and gold since 2017. If you’re planning to buy and sell Bitcoin, you may be wondering about the reasons for this and whether the trend is set to continue.

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Between 25 March 2017 and 24 March 2019, the trading price of Bitcoin rose from $936 to $5,399, representing a meteoric 476% return on investment in just two years. Over the same period of time, commodities like gold and oil delivered a return on investment of between just 1.3 and 31%, a stark difference.

One important fact to note is that while gold, oil and other real-world commodities have been traded for centuries across the globe, the oldest cryptocurrency on the market is barely a decade old. This means all cryptocurrencies are, in some respects, lesser understood and far more volatile to trade. This, in part, could account for the rapid rise in value over the past two years.

However, the general consensus amongst market analysts is that Bitcoin’s growth is set to continue and that where Bitcoin goes, other cryptocurrencies will follow. This year, 2019, has widely been recognised as a key time for Bitcoin as people increasingly adopt blockchain technology and governments around the globe shift their attitudes and their legislation to embrace the new frontier of currency trading. Simultaneously, the adoption of new technologies is making it easier and faster to carry out cryptocurrency transactions securely and inexpensively. And, Bitcoin is paving the way for other cryptocurrencies to follow. As trust in the coins grows, traders and institutional investors alike are all contributing to a growing critical mass, which in turn is increasing Bitcoin’s appeal. Behind the scenes, Bitcoin developers are working hard to make the product scalable; as demand grows exponentially, it must keep up and capitalise on the opportunity.

By comparison, in some quarters, investors are said to be too optimistic on gold, the old reliable stalwart. Research has indicated that the precious mineral may be set for a serious fall during the second quarter of 2019, despite a positive start to the year. This is thought to have created an overhyped situation where boom is quickly followed by bust. One potentially significant fact is that while private investors have continued to invest in gold, the arguably more savvy institutional investors have been keeping their distance. Joachim Klement is Head of Investment at Fidante and has been quoted as saying:

“The one asset we are cautious about the returns for the next three months is gold. [It] is too optimistic, in our view, and investors are not following through on this positive sentiment by investing into physical gold ETFs and funds. Given the seasonal decline in demand for physical gold in the second quarter, we expect gold prices to decline in the coming months.”

As with all trading, it’s not possible to guarantee either gold, oil or Bitcoin’s future values. Instead, investors must inform themselves as far as possible, taking information from a wide variety of sources. Having said that, the overriding feeling when it comes to Bitcoin, is that the future is bright.

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