Investors are hoping that bitcoin will become a “store of value,” but the largest cryptocurrency is still highly volatile, Tom Jessop, head of Fidelity Digital Assets (FDAS), said Thursday at the Reuters Global Investment Outlook Summit 2020.
“We use the words ‘potential store of value’ because bitcoin is still extremely volatile and, by any standard, perhaps would not achieve the mantle of a true store of value,” said Jessop, whose company, a unit of Fidelity Investments, offers cryptocurrency trading and custody services for financial firms and corporations. His remarks were reported by Reuters.
Jessop added that while bitcoin’s volatility prevents it from acting as a reliable way to store value, “aspirationally” it could be one, and “this is one of the reasons why so many investors are now thinking about this space constructively.” .
While sharp price movements in a market can often scare investors because volatility is confused with risk, the particularity of bitcoin’s volatility is that unlike the volatility index (VIX) for the S&P 500, the VIX of bitcoin tends to be positively correlated with the price of the asset.
In an October report related to the market capitalization of bitcoin, FDAS noted that due to the unrelated nature of bitcoin, the market capitalization of cryptocurrencies has ample room to grow.
“In a world where global benchmark interest rates are close to, equal to or below zero, the opportunity cost of not allocating to bitcoin is higher,” notes the report.