Bitcoin is emerging as a unique asset class, according to a recent report by Chris Burniske, blockchain analyst and products lead at Ark Invest, and Adam White, vice president of business development and strategy at Coinbase .
In their report , titled “Bitcoin: Ringing the Bell for a New Asset Class,” the authors argue that bitcoin is investable but differs significantly from other assets in its politico-economic profile, price of independence, and risk-reward characteristics. They believe cryptocurrency’s open source software will differentiate it further from other asset classes. They believe it could grow to substantial market capitalization. Asset Class Characteristics
Asset classes are viewed in different ways. Oftentimes they are seen in terms of investability. They also differ in their politico-economic features and their correlation of price movements and risk-reward profiles. Burniske and White explore bitcoin in the context of all four criteria.
The authors believe an asset class must be investable, providing opportunity to invest and ample liquidity. It should also have a politico-economic profile based on governance, value and use cases. In addition, its market value should fluctuate independently of other assets and exhibit a low correlation of returns.
The three characteristics noted above should provide a differentiated risk-reward profile that can be measured in volatility and returns, a fourth characteristic.
Burniske and Adams, by analyzing bitcoin’s behavior based on these four criteria, attempt to determine its merit as a bellwether for cryptocurrency. Bitcoin Versus Other Assets
Cryptocurrency as an asset class cannot be considered unique without observing its behavior in relation to traditional classes of assets: bonds, real estate, equities, energy products, precious metals and fiat currencies.
In examining bitcoin’s investability, bitcoin’s average daily liquidity in a three-month period nearly matched the SPDR Gold Shares ETF and was three times that of the Vanguard REIT ETF.“In our opinion, equal or […]
