The Bitcoin price has surged in value since the beginning of November. Since the beginning of the month, the value of the cryptocurrency has jumped 17% in dollar terms. It’s up around 16% in sterling.
Following this performance, the crypto asset has achieved one of the best performance of all financial assets this year. Since the beginning of the year, the Bitcoin price has increased by 125%.
After this growth, many investors have bought into the product anticipating further gains. However, I’m still not interested in buying the cryptocurrency. There are several reasons why I plan to stay away for the foreseeable future.
What’s in store for the Bitcoin price
The most prominent reason why I’m not rushing to buy is uncertainty. The total market capitalisation of Bitcoin is nearly $300bn, but I can’t really work out what that means.
It’s the total value of all Bitcoin in circulation, although as the cryptocurrency does not produce any cash flow or have any physical presence at all, I’m not really sure what I would achieve owning one.
Indeed, the Bitcoin price is only really worth as much as other investors are willing to pay for it. As such, if the market for the cryptocurrency were to suddenly disappear, its worth would likely drop to zero as there would be no way of telling how much others would be willing to pay.
Instead, I’d rather own stocks and shares. There are a couple of reasons why I’d rather own these assets over Bitcoin. For a start, it’s a lot easier to work out how much individual companies are worth. An enterprise or asset that produces goods or services, or provides shelter (such as a house), generates cash flow and will always be worth something.
What’s more, these assets have certain investor protections. And the world’s financial infrastructure is extremely well developed.
A better buy
The reasons above are why I’m concentrating on stocks and shares rather than Bitcoin. I want to own high-quality blue-chip stocks that provide a valuable service or product that customers want or need, such as pharmaceutical businesses or utility providers.
A great example is utility provider United Utilities. This company provides water and wastewater services for a large section of the UK. Therefore, I believe it has a more sustainable long term future than the Bitcoin price as consumers will always need access to fresh water.
Another example is AstraZeneca. This company is fast becoming one of the world’s largest developers and producers of cancer medication. Once again, these are the sorts of products that are always likely to have a market, so I think the business has a much more sustainable and predictable outlook that the cryptocurrency.
All in all, while Bitcoin has been a profitable asset to own this year, I’m still not convinced that it’s going to be a better investment than high-quality stocks and shares in the long run.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.