Bitcoin: Understanding the hype and risks for investors

Bitcoin, the most widely recognised cryptocurrency, has gained increasing acceptance and infrastructure support, making it easier to use for payments and investment. With a market capitalisation exceeding US$2 trillion, Bitcoin has evolved from niche beginnings to a significant asset, offering digital payment functionality and a store of value similar to gold. Its capped supply of 21 million coins and periodic “halving” events, which reduce the rate of new bitcoins entering circulation, contribute to its scarcity and potential long-term value.

In December 2024, Bitcoin hit the significant milestone of US$100,000, driven by a combination of factors, including expectations surrounding the Trump presidency. Trump’s cryptocurrency-friendly proposals, such as establishing a national crypto reserve, easing regulations, and supporting Bitcoin mining in the US, have helped solidify Bitcoin’s mainstream status. Additionally, regulatory developments like the approval of Bitcoin ETFs by the SEC and ASX have opened the asset class to institutional investors, driving further interest and adoption.

Despite Bitcoin’s increasing acceptance, we do not consider it well-suited for a retirement savings strategy. Its extreme price volatility, lack of intrinsic value, and susceptibility to security breaches make it a high-risk investment. For retirees or those nearing retirement, such risks can jeopardise long-term financial security. Stable, income-generating assets with predictable returns are better suited to safeguarding retirement wealth.

There is no direct exposure to Bitcoin in any of the Partners Portfolios.