Fidelity released a report last January that explains why “investors must consider BTC (0.46%) separately from other digital assets.” Fidelity identified several characteristics that Bitcoin has that make it more appealing as a store of value, and also makes it more secure than other digital assets. It was more urgent than ever in 2022.
2022 in a nutshell
The past year has seen turmoil and scandal. These were highlighted by the implosion of Terra stablecoin, and the recent bankruptcy of crypto trading platform FTX. If 2022 was to be reduced down to one headline, it would probably read something along the lines of “Centralized Players Exploit Decentralized Assets” and something similar.
Companies and individuals realized there was money in cryptocurrency thanks to the explosion of the currency and the growing interest from investors. They created their own cryptocurrency tokens. They extended credit to businesses they didn’t think deserved it. At times, they even repaid investors with dollars.
This is the main problem. It is important that cryptocurrencies be decentralized, and not under the control of one person or company. Fidelity’s report demonstrated through a series of analyses that Bitcoin is the epitome of security and decentralization. Additionally, it possesses other intrinsic characteristics that should help make it the preferred digital investment of investors.
It is 26 pages long. The paper is full of compelling reasons why Bitcoin should not be confused with other cryptocurrencies. Below are the main points made by Fidelity analysts to help you skip reading the whole paper.
In a class by itself
Bitcoin is unique in its ability to decentralize and protect itself from other cryptocurrencies. Many cryptocurrencies have gained popularity since Bitcoin’s creation. However many of these cryptocurrencies have given up security and centralization to allow for faster transaction speeds. Commonly, decisions regarding the rate at which new tokens become available or the consensus mechanism to use are left to a small group of community members like founders and developers.
Bitcoin is a distributed network that doesn’t have a central authority. In light of the weaknesses in some networks in 2022, this is a positive thing. Bitcoin’s worldwide network of nodes means it is far more secure than its closest competitors.
Fidelity analysts reached the surprising conclusion that Bitcoin is a “primary monetary good” and that it can be deemed sound money due to its scarcity, desire, and other characteristics. Fidelity suggested Bitcoin might be the most preferred digital asset because of its limited supply of 21,000,000 coins and its growing network effect.
Since Bitcoin was the first and last cryptocurrency for quite awhile, the blockchain of the network became the “most secure, decentralized, and liquid network”. These qualities, Fidelity states, incentivize users to choose the Bitcoin network. Fidelity analysts believe this will make Bitcoin more popular than other cryptocurrencies, and it will also increase its value as more people choose to use it.
Lessons to learn
After 2022, it is time for investors to realize that not every cryptocurrency is worth a place in their portfolio. Although they claim to be crypto, many of these assets are more like Ponzi schemes.
There will not be another Bitcoin. It should therefore be prioritized over all other digital assets. Bitcoin investors can be sure that the blockchain will not succumb to central actors who will inevitably arise and depart. However, what is most important is that it is likely to become the main digital asset for many years to come.