Last summer executives from Ark Invest and Coinbase released a paper called “Bitcoin: Ringing the Bell for a New Asset Class,” which defines the cryptocurrency as a new asset class for the 21st century. The paper written by Ark Invest’s Chris Burniske and Coinbase Vice President Adam White has recently been updated to reflect 2016’s data.
The paper’s authors believe bitcoin is a “first of its kind” type of investment with significant distinctions from traditional assets. Burniske and White explore four criteria within traditional asset classes and use economist Robert Greer’s studies as the reports reference for asset classification.
The newly refined report discusses bitcoin amongst traditional assets such as equities, bonds, real estate, precious metals, physical commodities, fine art, and currencies. The four specifications defined in context with cryptocurrency and traditional assets are investability, politico-economics, correlation of returns: price independence, and risk-reward profile.
Some new and interesting findings from the updated paper reveal that as of January 2017 Coinbase has stored over a $1 billion USD worth of bitcoin. Ark Invest and Coinbase estimate that more than ten million global citizens hold a portion of bitcoin. As the nascent industry matures the paper’s authors expect these numbers should continue growing in the future.
The document also explains that trading volume achieved billion dollar daily numbers, bitcoin’s transaction volume has “topped as much as $0.5 billion in one day—and is now consistently north of $200 million daily,” explains Ark Invest. Alongside this, the paper details transactional volume during 2014 through 2016 has seen significant year-over-year growth showing bitcoin’s increased demand.
When analyzing bitcoin’s correlation of returns or price independence, the paper says the cryptocurrency has significant contrasts to traditional asset classes throughout the past six years. “Bitcoin is the only asset that maintains consistently low correlations with every other asset,” says the research paper.
Finally, as far as risk and rewards are concerned, the paper explains bitcoin is less volatile than its early days. However, amongst the traditional assets measured within the report the cryptocurrency has the most volatility the paper explains:
“While bitcoin’s volatility has dropped considerably, it is still the most volatile of the broad asset classes over all the periods of this analysis. However, that may not remain the case for long since over the last year bitcoin was slightly more volatile than oil.”
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