Investing in Bitcoin

At Bitlafa Digital Funds we want you to make an informed choice as to whether investing in Bitcoin, or the BMA, is right for you. This is a highly speculative investment. Bitcoin is a highly volatile asset. This means the BMA will not be appropriate for all investors. You should read the disclosure material before investing. You should also seek advice from an independent financial adviser to help you make investment decisions. Bitcoin has great potential but also carries significant risks. We detail both below.

An Introduction to Bitcoin

Bitcoin has not been around for more than a decade, recent global events have shown it to be a credible financial asset. This digital money has now been used in every country in the world, with some national governments accepting it as a method of payment. Many people make the comparison with Gold hence the moniker ‘Digital Gold’.

Not everybody is bullish on the future of Bitcoin, there is a balanced discussion globally on the potential uses for the currency. The trend of adoption continues to increase at a rapid rate.

Crypto.com records global digital asset users increasing from 66 million in May 2020 to 221 million in June 2021.

Is Bitcoin Digital Gold 2.0?

Bitcoin has a finite supply, much like Gold. It is estimated the entire production of Gold throughout history could fit in 1.5 Olympic size swimming pools. During times of uncertainty and high inflation Gold is seen as a safe heaven.

Bitcoin is a similar asset to Gold in this regard. The maximum Bitcoins in circulation is capped at 21 Million, 80% of these coins have already been mined and only 20% remains. It will take until 2140 for all the remaining coins to be mined at an ever decreasing rate.

Bitcoin’s price has been consistently moving up since its creation, this is due to an increased demand from investors around the world. The continued printing of fiat currency globally since 2008 has increased demand for investments that are a hedge against devaluing global currencies.

Not Without Risk

While any investment carries risk, due to its relative immaturity Bitcoin carries more risk than some other investments, so investors must bear this risk in mind when considering whether to invest in Bitcoin.

Bitcoin is considerably more volatile than many other investment assets, and investors must expect to see large price moves as the market continues to mature.

When investing in Bitcoin, there are several risk factors that you should consider. The following is a summary of risks related to investing in Bitcoin that are disclosed in Bitlafa International Risk Disclaimer.

Some of the things that may cause the Fund’s value to move up and down, which affect the risk indicator, are:
The Underlying Funds invest in Bitcoin, an asset which has extreme price volatility. Factors which may cause the price of Bitcoin to change significantly over short periods include:

Maturing Market Confidence

In its infancy Bitcoin was a niche asset that was the realm of computer experts. The evolved towards ‘in the know’ retail investors getting in on the asset as it grew. Hedge Funds and Institutions join the party last and are now increasing their exposure.

Rather than investors having to send funds to an overseas exchange and understand the intricacies of hardware wallet storage to safely invest in Bitcoin, well-functioning and regulated platforms such as Bitlafa Digital Funds make Bitcoin accessible to a wider range of investors. Bitlafa Digital Funds provides a simple, smart and trusted way to invest in Bitcoin.

Bitcoin As A Payment Facility

“A Peer-to-Peer Electronic Cash System” – This is the original design brief, and it remains exactly in that vein. Mastercard, Visa and many other large payment institutions have recently indicated an interest in adopting the asset into their payments systems.

In early June 2021, 62 of the 84 members of El Salvador’s Legislative Assembly – a whopping 74% – voted to make Bitcoin the country’s official legal tender.

As smartphones become more and more mainstream as a method of payment the ease of using Bitcoin as a settlement currency only increases.

Strike app, from Jack Mallers, is working with El Salvador’s businesses and communities to make it fast and cheap and easy to send and receive tiny amounts of Bitcoin.

Changing investor demographics and the rise of smartphone payment systems like Alipay may be the forerunner to more widespread adoption of Bitcoin and other digital assets as efficient media to exchange information and value.

What Does “Smart Money” Think About Bitcoin

During a recent survey of 1,100 global institutional investors, Fidelity Digital Asset (September 2021) concluded that:

Over 50% of institutions surveyed globally are currently invested in digital assets.

71% of institutional investors surveyed plan to buy or invest in digital assets in the future.

More than 90% of surveyed institutions interested in digital assets expect to have allocations by 2026.
Institutional investors cite high potential upside and low correlation to other assets as two of digital assets’ most appealing features.

Additionally, public listed enterprises are following suit. Between 2020 and 2021 MicroStrategy, a US publicly listed business intelligence firm, bought US$2 billion in Bitcoin, declaring it preferable to cash as a reserve asset.

Digital payment company Square has bought US$50 million in October 2020, declaring that the time was right to diversify its US dollar-denominated balance sheet. In 2020 well established US pension Fund MassMutual purchased US$100 million

Additionally, public listed enterprises are following suit. Between 2020 and 2021 MicroStrategy, a US publicly listed business intelligence firm, bought US$2 billion in Bitcoin, declaring it preferable to cash as a reserve asset.

Digital payment company Square has bought US$50 million in October 2020, declaring that the time was right to diversify its US dollar-denominated balance sheet. In 2020 well established US pension Fund MassMutual purchased US$100 million

Digital Assets And Blockchain - Are They The Future?

As the world moves more and more of its day to day functions online it is most likely that Bitcoin will solidify its position as a global means of exchange.
It is estimated that over 10,000 different Digital Assets or “cryptos” have been created to date, and it may be daunting to navigate through this nascent asset class.

Bitlafa Digital Funds offers a simple, smart and trusted way to invest in the BMA.

Digital Assets like Bitcoin are not for everyone, and “tweets” and opinions can have a huge short term impact on market prices. This also presents opportunity for short term traders – Bitlafa is also well placed to capitalise on these.

Bitcoin As Part Of A Balanced Portfolio

Although many investors still perceive Bitcoin as a risk asset that is correlated to equities, Galaxy Fund Management, in their research, observed Bitcoin trades similarly to non-fiat stores of value like gold.

Historically, Bitcoin’s correlation among established macro assets typically hovers within +/-0.25 around a zero correlation.¹ Over the last decade, Bitcoin has demonstrated low or even slightly negative correlation to most major global asset classes including the S&P 500, Euro Stoxx 600, Nikkei 225, MSCI Index, US Agg Bond Index, Crude WTI, Gold, the DXY, EUR, and other emerging market currencies.

In a May 2020 letter to investors, renowned hedge fund manager Paul Tudor Jones predicted that Bitcoin would be the best-performing hedge against what he called “the Great Monetary Inflation,” and disclosed a 1%–2% allocation to Bitcoin in his portfolio to protect against the potential decline of the U.S. dollar.

Talk to your financial advisor about what is right for you and your portfolio.

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  • A limited supply of Bitcoin (maximum of 21 million) making the price very sensitive to demand changes.
  • Market dynamics, regulatory actions and changes, technical advancements, as well as broader economic and political factors.
  • Bitcoin is a relatively new asset making it difficult to value and highly sensitive to news and announcements.

It is possible that Bitcoin, or the Blockchain technology used by Bitcoin will never be broadly adopted by either the retail or commercial marketplace. In which case, Bitcoin may lose most, if not all, of its value. In addition, cultural adoption of Bitcoin (for example by internet subcultures) may fade.

When investing in Bitcoin, investors need measures for safe storage of their digital assets (including holding their digital assets offline, in cold storage), there have been significant incidents of digital asset theft and digital assets are a target for hackers. Digital assets that are stolen or lost cannot be replaced, as transactions are irrevocable. Additionally, there is a risk that the Fund may suffer a loss as a result of theft or fraud.

Blockchain technology is used to record the ownership of cryptocurrencies like Bitcoin. Blockchain related risks may affect the value of Bitcoin, and therefore, the medium-to-long term value of the assets of the Underlying Funds are subject to a number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets. These considerations include:

  • The various source codes used in digital currencies like Bitcoin are subject to change and may at any time contain one or more defects, weaknesses, inconsistencies, errors or bugs.
  • If the digital asset awarded for mining blocks and transaction fees for recording transactions on the Bitcoin network are not sufficiently high enough to incentivise miners, miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of Bitcoin.
  • The Bitcoin network requires significant computing power, which in turn consumes a substantial amount of energy, to mine Bitcoin. Its energy consumption may become, or be deemed to be, unsustainable (barring any future efficiency improvements being designed for the network). This could pose a risk to broader and sustained acceptance of the network as a peer-to-peer transactional platform.
  • There is a potential security flaw in Bitcoin and blockchain technology. If a group gained control of more than half the computers within the Bitcoin network, they could potentially halt payments between users, or even reverse transactions. Malicious activity from such a group could negatively affect Bitcoin’s value.
  • Because cryptocurrencies like Bitcoin are powered by decentralized, open-source software (being blockchain), it is possible for a community to make changes to the blockchain’s protocol, or basic set of rules. This process, which is called a “fork”, can be used to create entirely new types of coins. The introduction of new types of coins could influence the price of Bitcoin negatively.
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Digital assets like Bitcoin may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect on their market price. There are other risks investors should take into consideration.

Globally, Bitcoin is largely unregulated. Hence, Bitcoin investors receive little if any regulatory protection. Bitcoin may become regulated but the form of any framework is uncertain. This means the regulatory implications of the Underlying Funds buying, holding, using and selling Bitcoin are uncertain. Current and future regulation risk may have a significant impact on the value of Bitcoin.

Bitcoin is not the only digital currency. There is risk other digital currencies gain greater acceptance than Bitcoin. The supply and acceptance of other digital currencies could adversely impact the value of Bitcoin.

Understanding Managed Cryptocurrency Trading

Earn 2% – 5% per month, from a managed  account, with minimal risk. 

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