Research Summary
The report discusses the reasons why insurance companies should consider Bitcoin as an investment option. It highlights Bitcoin’s historical performance, its scarcity, and its potential as a store of value. The report also notes the growing acceptance of Bitcoin among businesses and institutional investors.
Key Takeaways
Bitcoin’s Historical Performance
- Decade of Remarkable Gains: Despite its volatility, Bitcoin has outperformed other asset classes over the past decade, being the best-performing asset class for eight out of the past eleven years. As of December 31, 2023, Bitcoin’s historical returns for various holding periods have been impressive, with a 10-year return of 6,172.12%.
Bitcoin’s Scarcity
- Increasing Value Over Time: Bitcoin’s supply is capped at 21 million, a factor that has contributed to its value over time. The report notes that the price of Bitcoin has rallied leading up to and following each “halving” event, which reduces the reward miners receive for validating transactions by 50%.
Bitcoin as a Store of Value
- Digital Gold: Bitcoin’s fixed supply and increasing difficulty in mining new coins have led to its comparison with gold, a traditional store of value. Bitcoin is seen as a potential digital alternative to traditional safe-haven assets, making it a good fit for clients looking to hedge against inflation, preserve wealth over the long term, and diversify their portfolio.
Bitcoin’s Future
- Increasing Adoption: The report notes that Bitcoin’s adoption has grown substantially in 2023, with more merchants and businesses accepting it as a form of payment. Infrastructure has been developed to make Bitcoin more user-friendly, removing the technical barriers that existed in its early years.
Institutional Interest in Bitcoin
- Attracting Big Players: Institutional investors, including hedge funds, asset management firms, and endowments, are increasingly recognizing Bitcoin’s potential as a store of value and an effective portfolio diversifier. Approximately $50B worth of Bitcoin are now held by ETFs, countries, public and private companies.
Actionable Insights
- Explore Bitcoin’s Potential: Insurance companies should consider the potential of Bitcoin as an investment option, given its historical performance, scarcity, and potential as a store of value.
- Consider Bitcoin’s Growing Acceptance: The growing acceptance of Bitcoin among businesses and institutional investors indicates a trend that insurance companies should monitor closely.
- Understand Bitcoin’s Volatility: While Bitcoin has shown remarkable gains, it is also known for its volatility. Insurance companies should fully understand this aspect before considering it as an investment option.
