【PANews Column】Why is Bitcoin considered the best-performing financial asset of 2019?

2019 was a profitable year for investors.

The average increase in debt investment is as high as 14%, while in the stock market, the S&P 500 index rose by 29%, the Dow Jones index by 22.3%, the Nasdaq 100 index by 37.3%, gold by 18.6%, and oil by 34.2%. All assets performed well, bringing substantial profits to investors.

Although traditional financial assets saw significant value increases in 2019, the best-performing asset class last year was still the emerging digital currency category.

Bitcoin (BTC), as the largest in terms of total market value of digital assets, successfully weathered the aftermath of the 2018 bear market and re-entered a bull market in early 2019. From January 1st to December 31st, its price rose from $3,739 to $7,293.

Of course, while Bitcoin's price was rising, 2019 was not as favorable for other cryptocurrencies outside of Bitcoin.

The second and third-ranked digital currencies, Ethereum and Ripple, brought negative growth to investors in 2019, with -0.7% and -45% respectively. Among the top five digital currencies (excluding stablecoins), only Bitcoin Cash (BCH) and Litecoin (LTC) saw increases of 37% and 41% respectively. As mentioned, Bitcoin's 95% increase in 2019 exceeded all other assets. Therefore, we can confidently say that Bitcoin was the best-performing asset class of the year.

So why was Bitcoin able to emerge from the 2018 bear market and perform the best in 2019?

Irrelevant Asset Class and Value Storage Medium

Due to its decentralized nature, Bitcoin is an irrelevant asset class. This means that Bitcoin is different from asset classes like stocks and bonds, whose prices are highly influenced by government or central bank decisions. The price fluctuations of these assets are unlikely to affect the value of Bitcoin.

For those concerned about significant geopolitical events, Bitcoin's independence from sovereign governments makes it an attractive investment category. For example, the US-China trade war in 2019 likely led to an increase in Bitcoin investments.

Furthermore, because the total supply of Bitcoin is only 21 million coins, it is not affected by the high inflation rates of most fiat currencies (such as the US dollar, euro, and pound).

As a scarce and irrelevant asset, investors see Bitcoin as a value storage medium (an asset that does not depreciate), similar to gold. This is why some refer to Bitcoin as "digital gold."

Emerging Asset Class with Tremendous Growth Potential

One of the major criticisms of Bitcoin by some "Wall Street wolves" is that digital assets are a relatively new asset class. According to this logic, investing in Bitcoin carries higher risks compared to buying company stocks, as stocks have a longer history in the market.

Although Bitcoin's young history of just over a decade may have some negative impact on investors, it may also bring some unique advantages that significantly contributed to its 95% price growth in 2019.

At the end of 2017 and the beginning of 2018, as the market entered a bull run and prices soared, cryptocurrencies were in the spotlight.

If we look back at the profits made by investors who bought and sold digital assets at the right time, it is evident that Bitcoin's growth potential is significant and more attractive than low-yield assets like government bonds.

Impact of Developing and Maturing Digital Currency Assets

One of the biggest trends in the bull market at the end of 2017 and the beginning of 2018 was Initial Coin Offerings (ICOs).

ICOs allowed startups in the cryptocurrency industry to issue tokens themselves and sell them to investors. Many institutions in the industry took advantage of this mechanism flaw to launch scam projects and make quick profits.

Even worse, ICO fraud grew exponentially, with fraudsters taking the raised funds and not fulfilling their promises.

However, the bear market of 2018 changed everything. Cryptocurrency prices plummeted, and the number of fraud and immature projects significantly decreased. Finally, the digital asset market began to develop organically and mature, allowing institutional investors to enter the cryptocurrency sector.

Several countries strengthened industry regulation and scrutiny, and at the beginning of 2019, Initial Exchange Offerings (IEOs) replaced ICOs as a safer and more effective fundraising method for digital currency projects (IEOs are conducted on trading platforms, with pre-screening of projects and providing various services to startups).

Bitcoin's price is likely influenced by the continuously developing cryptocurrency market, leading to a significant price increase in 2019.

We cannot predict what will happen in 2020, but for digital currencies, we will see more growth and applications in 2020.

This article is from our partner PANEWS

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