Jumpy 2017: the best and worst performing assets
With only 2 weeks left until 2018, it’s time to analyse and sum up the results of this year. Do you want to find out what are the best and the worst performing assets of 2017? Keep on reading!
The best - Bitcoin and cryptocurrencies
2017 became a truly unprecedented year for the growth of cryptocurrencies when the total market cap peaked up to $514 billion.
Bitcoin investors, in particular, got used to seeing their capital grow every day. You can sell or buy Bitcoin on one of the many unregulated virtual exchanges and in December another step into the future was made with the help of the Chicago Board Options Exchange (CBOE).
Bitcoin futures will also begin trading on the Chicago Mercantile Exchange on December 17-18, while the Nasdaq will debut the options sometime next year. The next important psychological barrier that Bitcoin has yet to overcome is $20k.
How did Bitcoin manage to grow so fast?
- In April Japan made Bitcoin a legal form of currency. Now it is recognised as a legal tender and provisions for administrative and accounting systems take place seamlessly. Hundreds of thousands of retailers in the area are said to be equipping themselves to accept bitcoin payments, with a low-cost airline, Peach, becoming the first commercial carrier to directly offer consumers tickets paid in bitcoin.
- Later on, Australia eliminated the double taxation on digital currency transactions.The proactive progression by these countries certainly paves the way for others to learn from their integration and regulatory practices, empowering mainstream bitcoin adoption, which naturally pushes the price higher as demand increases.
- Another undeniable driver of growth are citizens who have lost confidence in their country’s ability to maintain stable economic and political policies, and desperately seek to establish their own sense of financial freedom outside the manipulation of governments.
Other cryptocurrencies also keep growing in the shadow of Bitcoin. The second largest cryptocurrency in the world - Ethereum also hit its new all-time high of $750, climbing for more than 60% for the last week only. Another example is Litecoin (the fourth largest cryptocurrency this year). Since the start of 2017, Litecoin has risen 7,291% against bitcoin’s 1,731%.
We can say that there is truly a wide range of young cryptocurrencies on the market and if you are not ready to take part in the Bitcoin rally, it can be a nice alternative.
The worst - Cash
2017 is a period of transition, the time when we enter the new era of raising the interest rates and reducing of quantitative easing. Billionaire Ray Dalio, the founder, co-chairman, and co-CIO of Bridgewater Associates has an interesting (but not entirely new) idea that the worst asset that you can have in 2017 is cash.
According to Warren Buffett “The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and that sort of thing. Cash is going to become worthless over time. But good businesses are going to become worth more over time.”
It’s also one of the most common mistakes that we can make right now and it can cost us a lot. Usually, keeping your funds in cash is a part of cautious investors strategy, when the main goal is to preserve your wealth. However, it still involves certain risks.
Starting from 2004 cash was the second-worst performance out of the 10 major asset classes, according to JP Morgan. Only highly volatile commodities performed worse. Even emerging markets, with their volatility and their collapse in 2008, outperformed cash over the 10 years cumulatively by 180.7%.
Can cash be a good investment?
- Inflation - cash loses value over time. The average inflation rate is around 3%, which means that every year you will be able to buy less for at least 3% with your money.
- Interest rates - saving accounts can offer you an average rate of 5% and inflation takes 3% of it still.
- Cash doesn’t work, but investing does.
As you can see, in 2017 there were plenty of opportunities to make money or at least not lose it. Although we can’t be sure what happens next, we can say that the world is making a new step in the direction of the digital future.