Dr. Jeff Ross, founder and CEO of Vailshare Capital, currently debate The reason people hold and invest in Bitcoin is not because they are diversifying. The purpose of this, Ross explained in a post on X, is because most people want to maintain and gradually increase their purchasing power rather than spread risk.
Bitcoin is about preserving purchasing power
The CEO’s perspective directly contradicts the conventional wisdom often held by financial advisors. Most recommend diversification, including investing in store-of-value assets such as gold, as a key strategy for reducing risk.
In contrast, Ross claimed that traditional assets such as bonds, while providing diversification, can be susceptible to inflation risks that could erode purchasing power in the long term.
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Ross responded Robin Crooks, former chief currency strategist at Goldman Sachs, downplayed Bitcoin’s recent rally. Crooks said Bitcoin is edging higher as the market corrects. The shift, which boosted Bitcoin and other safe-haven assets, comes as the U.S. Federal Reserve prepares for a change in monetary policy that could lead to a sharp interest rate cut in March.
It’s this expectation that explains Bitcoin’s rise, Crooks added. The analyst went against the grain, claiming that the reason why the coin is not rising is because of the “diversification” benefits of its store-of-value properties. Bitcoin holders often cite Bitcoin’s deflationary nature and how it prevents traditional assets from losing value, citing this as an advantage.
Even so, despite the volatility, Ross pushed back against Crooks’ preview, pointing to Bitcoin’s historical performance and how it has successfully “maintained and grown purchasing power.”
Despite Bitcoin’s stellar performance over the years, critics remain unconvinced, arguing that its volatility and lack of intrinsic value make it speculative. In support of this view, Crooks, who has been dismissive of Bitcoin in the past, added that Bitcoin is a “bubble.”
Early last year, the former Goldman Sachs analyst explain When the Fed tightens currency and the “store of value” function is zero, Bitcoin will “explode.”
Bitcoin maintains upward trend ahead of halving
The world’s most valuable coin has been trending higher since the beginning of 2024. One reason for community optimism is the U.S. Securities and Exchange Commission’s (SEC) approval of a spot Bitcoin exchange-traded fund (ETF). Through the product, investors have been doubling down on the asset, raising bids and subsequently pushing the coin to new highs.
At the same time, the network will adjust the number of tokens allocated to miners as block rewards starting in early April. At that time, the reward will be halved from 6.25 BTC.
Based on historical performance, expected emissions reductions could trigger further gains in the second half of 2024. The halving could make Bitcoin an attractive asset as a hedge against inflation, making it an ideal store of value.
Feature images from Canva, charts from TradingView