Anyone who bought a Bitcoin for 19,497.40 euros on December 16, 2017, lost 82 percent of their stake in one year and was still sitting on a loss of 74 percent on March 16, 2020.

But those who remained loyal to him could double their stakes until mid-January 2021.

Bitcoin seems to be the ultimate medium for gamers.

Nevertheless, investors like the foundations of the universities of Harvard, Yale and Stanford as well as hedge fund legends like Paul Tudor Jones and Stanley Druckermiller invest in Bitcoin and other cryptocurrencies.

What is it that drives you?

You could say they are following a new lead.

Bitcoin came into being at the height of the financial crisis when an anonymous computer scientist who called himself Satoshi Nakamoto sent out a proposal on October 31, 2008 entitled "Bitcoin: A Peer-to-Peer Electronic Cash System".


In it, he described software that could be used to electronically store, send and receive money without banks or other financial firms that were just failing.

For this purpose, the electronic money called "Bitcoin" was encrypted and made transferable via a decentralized account book called "Blockchain".

Nakamoto's invention turned out to be ingenious and would be more than worthy of a Nobel Prize if you knew who is behind the pseudonym.

Bitcoin is created as a pure combination of numbers and is not covered by any real value - like a gold currency - or a claim that has arisen in the real world - like our existing credit money.

That raised the unanswered question of how it should be assessed.

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Matt Hougan and David Lawant, in a recent report from the CFA Institute Research Foundation, suggest looking at bitcoin and other cryptocurrencies like commodities.

Since there is no current income for either one or the other property, they cannot be valued using discounted cash flows.

One can only estimate the price by looking at supply and demand.


Since Bitcoin, like nine of the top ten cryptocurrencies, has a limited supply, the price results from demand.

This arises from the interaction of low transaction costs, a large network and the limitation of the offer.

Since only around seven transactions per second can be processed in the Bitcoin blockchain, it is not suitable for mass operation.

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For large payments, however, the currency is attractive.

Hougan and Lawan report a transfer of 161,500 Bitcoin worth $ 1.1 billion in 2020. It reached its recipient immediately and cost only $ 0.68.

A standard bank transfer abroad, on the other hand, would have taken two days and devoured at least ten million dollars in fees.

Since the supply of Bitcoin is limited to a total of 21 million pieces, of which 18.6 million have already been issued, and there are neither negative interest rates nor bank charges on Bitcoin, it can in principle serve to reserve funds for larger payments.

Ethereum can also use "smart contracts"


Another reason for the demand for cryptocurrencies is the ability to make money transfers conditional.

Since payments can be linked to contractual agreements in this way, we speak of “smart contracts” and “programmable money”.

For this purpose, the Bitcoin blockchain at Ethereum, the crypto currency with the second largest market capitalization after Bitcoin, was further developed.

This technology is particularly interesting for more complex financial transactions, so that one speaks of "decentralized finance".

Finally, there are also applications that require high transaction speeds.

This applies to Ripple, the fourth largest cryptocurrency by market capitalization, which does not use a fully, but a controlled, decentralized blockchain.

All in all, the different blockchain technologies or better known as “distributed ledger” technologies each offer specific advantages for certain applications, so that different cryptocurrencies can exist side by side.

First of all, the simpler the technology, the safer it is - even in front of governments that want to defend their monopoly on money.

And secondly, the larger its user community, the more attractive the currency is.

For investors, cryptocurrencies can be interesting as an addition to their portfolios.

It is true that the correlations between the price of Bitcoin and the prices of stocks and gold are very unstable and have risen in the course of the last year, which is probably due to the unbridled increase in credit money by the central banks.

However, calculations by Hougan and Lawant show that the addition of Bitcoin can significantly increase the return on a portfolio without increasing the fluctuations in the portfolio value to the same extent.

The bottom line is that with cryptocurrencies, a new class of assets is emerging that is attracting increasing interest from investors.

But because of the large price fluctuations, it is not for the timid.

Thomas Mayer is founding director of the Flossbach von Storch Research Institute and professor at the University of Witten / Herdecke