Bitcoin as the New Benchmark for Investments
The phrase “Bitcoin is the hurdle rate” is popular in crypto circles. It suggests that Bitcoin is the best standard for investment returns. If an investment doesn’t beat BitcoinS returns, it’s not worth considering. Let’s explore this idea further.
A hurdle rate is the minimum return needed to make an investment worthwhile. It considers costs, inflation, interest rates, and risks. Companies often use their weighted average cost of capital (WACC) as a benchmark. Though, Bitcoin enthusiasts argue that Bitcoin should be the new benchmark.
Traditionally, the yield on 10-year U.S. Treasury bills is used as a risk-free benchmark. But Bitcoin supporters challenge this. They claim Bitcoin outperforms Treasury bills and offers better long-term value.
- Bitcoin has a fixed supply limit of 21 million coins.
- New bitcoins are issued on a predictable schedule.
- Bitcoin has shown strong long-term price growth.
Bitcoin’s performance is seen as more reliable than Treasury bills, which have faced volatility.For instance, during the 2008 financial crisis and the COVID-19 pandemic, Treasury bill yields dropped significantly. In contrast, Bitcoin emerged as a safe haven asset.
some argue that Bitcoin’s decentralized nature makes it a better benchmark. Unlike Treasury bills, which are influenced by central banks, Bitcoin operates independently.This coudl make it a safer long-term investment.
Though, not everyone agrees. Some Bitcoin purists criticize the idea, especially when it’s used to promote Bitcoin treasury
