Bitcoin Primer
An introduction to Bitcoin: what it is, how the blockchain and mining work, its history, and why its scarcity and low correlation make it a compelling 3%-5% portfolio allocation.
What is Bitcoin?
Bitcoin (BTC) is a decentralized digital currency created in 2009 by an anonymous entity known as Satoshi Nakamoto. It operates on a peer-to-peer network, allowing users to send and receive payments without intermediaries like banks or governments.
How it Works
Blockchain Technology
Bitcoin transactions are recorded on a public ledger called the blockchain, ensuring transparency and security.
Mining
New Bitcoins are created through a process called mining, where powerful computers solve complex algorithms to validate transactions.
Fixed Supply
There will only ever be 21million Bitcoins, making it a deflationary asset, unlike fiat currencies subject to inflation.
A Brief History
- 2009: Bitcoin’s genesis block is mined, marking the birth of cryptocurrency.
- 2010: The first real-world Bitcoin transaction: 10,000 BTC used to buy two pizzas.
- 2017: Bitcoin hits $20,000for the first time, sparking mainstream attention.
- 2020-2021: Institutional adoption surges, with corporations like MicroStrategy and Tesla adding Bitcoin to their balance sheets.
- 2024: Bitcoin spot ETFs launch, attracting billions in assets from retail investors and some of the largest pensions
The Investment Opportunity
Why it Matters
Digital Gold: Bitcoin is often called digital gold due to its scarcity and ability to hedge against ongoing fiat currency devaluation and any other causes of inflation, like deglobalization and energy shortages.
Diversification: With historically low correlation to traditional assets, it has enhanced portfolio resilience in volatile markets
Macro Hedge: Bitcoin could serve as a safeguard against systemic risks like mounting global debt, inflation, and overreach from central authorities (e.g., CBDCs).
By the Numbers
+25,000%
Over the past decade, Bitcoin has delivered unparalleled returns. From November 30, 2014 through November 30,2024, BTC had a total return of 25,412% (78.16% annualized).
>$100B
Through November 2024 (less than 11 months after their launch), the spot Bitcoin ETFs’ total assets under management grew to over $100 Billion. With growing use by institutions, Bitcoin’s potential to further mature into a global financial asset is significant.
The Big Picture
Bitcoin represents a shift toward financial liberty, empowering individuals to control their assets in a decentralized system. Its fixed supply, transparency, and growing adoption make it a compelling asset for forward-looking investors.Allocating 3%-5% in a diversified portfolio could enhance returns while preparing for future macroeconomic challenges
Important Information
There is no guarantee that Bitcoin will continue to perform at historic returns and market risk and loss of principal is possible.
Diversification does not guarantee against a loss.
Investing in Bitcoin involves significant risks due to price volatility and the potential for theft or compromise of private keys. Digital assets represent a fairly new industry, and future regulations and governance is unclear. The price of Bitcoin is tied to overall market sentiment and acceptance.
This Bitcoin primer is based on the assessment of the current market environment as of Q4 2024, and is subject to change.
Written by THRYVE Wealth Management, LLC, an SEC Registered Investment Advisor
About THRYVE
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General Disclosure
THRYVE Wealth Management, LLC (“THRYVE”) is a registered investment advisor. The information provided herein is for informational purposes only and does not constitute legal, tax, or accounting advice. THRYVE does not provide legal or tax advice, and nothing communicated by our firm or its representatives should be construed as such.
Clients and prospective clients are strongly encouraged to consult with their own qualified legal counsel, tax advisor, or accountant regarding any legal or tax matters. Any discussion of tax or legal topics is general in nature, based on information believed to be reliable, and is not intended to be relied upon as a substitute for professional legal or tax guidance specific to your individual circumstances.
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