Keep in mind though, that because bitcoin is still very volatile and explosive at its core, it will increase the overall volatility of a balanced portfolio. But historically it has boosted returns (although it’s important to remember that past performance is not a guarantee of future returns).
As CoinShares offers, using a 4% weighting in a balanced portfolio increased returns from 9.3% to 18.8%. The calculation is a 5-year period to the end of October 2020 (although it’s important to remember that past performance does not guarantee future returns).
As well, looking at the period from January of 2014 to the end of October 2020, an allocation of bitcoin would have contributed positively to a diversified portfolio’s cumulative and risk-adjusted returns in 74% of one-year periods, 97% of two-year periods, and 100% of three-year periods since 2014, assuming quarterly rebalancing.
How widely accepted is bitcoin today?
In July 2020, Michael Saylor, the billionaire founder of MicroStrategy, an American corporation that offers software-based solutions to client companies, directed his company to hold part of its cash reserves in alternative assets. By September, MicroStrategy’s corporate treasury had purchased bitcoins worth $425 million. Square, the San Francisco-based payments company, bought bitcoins worth $50 million in October 2020. More recently PayPal announced that American users can buy bitcoins, as well as hold and sell it in their PayPal wallets. Every week we see more major financial institutions “come on board.”
How do you buy bitcoin and hold cryptocurrency?
Like paper money, you hold bitcoin in a wallet. In this case, it is a digital wallet. And “wallet” is a misnomer; the wallet doesn’t secure your bitcoin, but, rather, storing your keys—digital code that is required to unlock your bitcoin investment. No one, not even you, can access your bitcoin without your keys.
You can hold your bitcoin in a “hot wallet” or a “cold wallet.” Hot wallets are digital wallets stored online, whereas cold storage or cold wallets are most often physical hardware devices. As you might guess, cold storage is the gold standard for securing bitcoin keys; money held in a hot wallet might be as secure as a physical leather wallet—it could be stolen.
A cold wallet, which costs upwards of $150, offers physical bitcoin storage and is more secure, like a vault at a bank. Technically, your cold storage cannot be hacked as it is not accessible online. Think of it like a vault at the bank. Of course, you would have to take great care to ensure that you understand the technology and processes for storing your personal keys in a cold wallet.
What bitcoin options are available in Canada?
With the following options you will not have to own or create your own wallet, and becoming a bitcoin investor is as easy as opening an account and pressing a few buttons to buy or sell bitcoin. These companies will hold and store your keys on your behalf. As with buying mutual funds or ETFs there are fees for these services.
Informative thank you – I have been looking at the 3iq fund bit then it made the sharp increase before I could act – so monitoring for now.
Is this Worth investing into in February 2021??
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
Thanks for an excellent article. Can bitcoin be purchased in Corp or non-registered account ?
very interesting
If you do decide to invest in this space you need to look at your entire portfolio and decide what % of your money you are inclined to do so with. I am not a professional advisor but having been invested for many many years in the markets taking an allocation of 5% should by the most for this sector. It is also very volatile so losing your money is a higher possibility than many other sectors of our markets.
I understand that on Thursday, Feb 18 this week Canada will start trading the world’s first Bitcoin ETF which I would think must be a very easy (and safe?) way to trade it.
Hi Blair Rogerson and other readers. Apologies I was not tracking this for comments. It is such a volatile asset that one might consider building a position over time. Obviously from end of January, bitcoin has had another great run.
We have to be prepared for incredible volatility on both sides.
We might build positions, and then have a rebalancing (exit) strategy as well to take advantage of explosive gains to the upside.
Dale
Thank you for explaining your are right I am over 55. This new asset class was totally not understood.
Thank you. P
Hi,
I have a couple of questions, I have some graphics cards that will work for mining BitCoin, my questions are:
1) If I earn some bitcoins how do I value them for Canada Revenue?
2) After I own them I assume any gains or losses are probably treated as Capital Gains?
3) I’m retired & would like to keep this separate from my various other income sources, so I’m thinking of starting a Canadian numbered company & if I leave the bitcoin in the company(pay any taxes there) & does it only get added to my personal income when taking a dividend or some other payment from the company?
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
I made some money on Bitcoin with GBTC. However, I have changed my opinion on Bitcoin and cryptos. I think they have no future when countries ban them and create their own digital currencies. With the recent Colonial Pipeline hack, I’m pretty sure the US is going to do something about cryptos.
In what sane universe can a 27 year old (Ethereum) create value out of thin air and attain a net worth of $20 billion?
Cryptos = Tulipmania.