The blockchain industry not only attracts the public’s attention but also continues to obtain investments from institutional investors. But is the technology a good investment opportunity? Is it a hype or a viable use case?
BTCS Case Study
BTCS is a U.S. based blockchain technology and digital asset focused company. The company is one of the first U.S. publicly traded firms focused on blockchain technologies and digital assets. The company aims to acquire digital assets to offer investors indirect ownerships of digital assets.
In the second quarter ended June 30th, 2020, BTCS expanded its digital asset positions to over $1 million, which is an increase of more than 285% from the previous quarter. Through timely purchases of Ethereum and Bitcoin, BTCS has significantly grown its digital asset portfolio over the past 12 months.
The company believes Bitcoin, Ethereum, and other major digital assets are a great store of value and can be an effective economic hedge against monetary devaluation in the wake of multi-trillion-dollar government bailouts across the globe. The price of Bitcoin has made an impressive rebound of over 80% since its recent low in March 2020. The company believes that Bitcoin’s corrective price bounce back is driven by a flight to safety during the ongoing Coronavirus crisis and the recent block reward halving that occurred on May 12th, 2020.
While BTCS believes Bitcoin and Ethereum are a great store of value, its management plans to use their industry experience to further expand the company’s digital asset holding to diversify risks as they continue growing the business. A core aspect of the company’s business plan is to establish positions in key digital assets. However, the company avoids digital assets that it believes may be classified as digital securities.
Cryptocurrencies Are A Resilient Financial Instrument for Portfolio Growth
While digital assets are volatile and have considerable risks, they present lucrative trading opportunities. Since the beginning of this year, Bitcoin has outperformed all other traditional assets. During the second quarter of 2020 BTCS increased its BTC and ETH holdings by 163% and 134% respectively.
BTCS’s success shows that investors should consider including cryptocurrency as an investment opportunity or cryptocurrency exposure as part of a well-diversified portfolio. In addition, given cryptocurrency can be a volatile investment opportunity, it’s important to diversify within a cryptocurrency portfolio, which is an essential component of BTCS’ business plan.
The company focuses on digital assets with large market capitalizations (i.e., Bitcoin and Ethereum). Such crypto projects already have built out a strong ecosystem and infrastructure, enabling a significant group of active users to use, trade, and hold them for various activities. These crypto projects have growth potentials and fewer risks. The company is also keenly focused on digital assets which provides exposure to disruptive protocol layer verticals such as smart contracts, data storage, and the Internet of things.
The case study of BTCS showcases the future of blockchain technology as a potential investment opportunity. Cryptocurrency is a good diversifier in a traditional portfolio. They are alternative investments that have a lower correlation to traditional asset classes like cash, bonds, and stocks. Therefore, cryptocurrencies can be an exceptional alternative investment, particularly in terms of bringing diversification to mainstream assets.