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Thought Leadership

In a webinar hosted exclusively for our Gerber clients, we were joined by Matthew Horne, head of Business Development in the Digital Fund Division of Fidelity’s Cryptocurrency team, to help us debunk the myths around cryptocurrency and understand the exciting opportunities in this new space. 

Want to find out exactly how cryptocurrency may fit into your own investment portfolio? Read the recap below!

What the heck is cryptocurrency?

Bitcoin, the first and most widely known cryptocurrency, officially launched in January 2009. The idea of creating a digital store was immensely intriguing, and legacy banks and asset management firms were proving solvent. 

The key difference between cryptocurrency and the types of currency we are familiar with today is that it is decentralized, meaning that it is not controlled by a banking institution, and is not regulated by any governments. 

To help illustrate the concept, Horne compared bitcoin to a digital version of gold. Gold has been used by individuals and institutions for thousands of years as a store of value. 

What is a store of value? 

Economists qualify something as a store of value if it is scarce, portable, has a high settlement speed (meaning it can be transferred quickly), is verifiable, divisible, and has an established history. 

Gold fits all these characteristics: it is scarce, easily moved and transferred, able to be chemically verified, split into smaller parts, and has a rich history of being used throughout human civilization. 

Bitcoin fills almost all these criteria in a similar, if not more sustainable way than gold. There are currently 18.7 bitcoin on the market, valued at a little over $30,000 each, fitting the scarcity criteria. 

Bitcoin is transferred through a digital network of computers called a blockchain, making it extremely portable and quick to change hands. 

Because of the stringent protocols on the blockchain network, and the individuals who monitor the bitcoin market, bitcoin is highly verifiable. Divisibility is possible with bitcoin as well: it can be divided up to the eighth decimal place, making it easy to purchase smaller quantities of bitcoin.

The only criteria that bitcoin does not fit is the established history, having only been used as a store of value for a little over 12 years. However, with investments by legacy asset management firms like Fidelity and more businesses accepting it as a valid form of payment, bitcoin is slowly securing its future as a premier store of value. 

What does the future hold for cryptocurrency? 

Since 2013, the Fidelity Center for Applied Technology has been leading research on bitcoin functions, and creating platforms for investors. These efforts see bitcoin as disruptive, and rather than investing in opportunistic ventures, are interested in creating sustainable programs to maximize the possibilities of cryptocurrency. 

New bitcoin will be released until the year 2140, so the market is ripe for sustainable growth. 

How well do you understand cryptocurrency? Are you using it in your portfolio? Share with us on Facebook and Instagram!