November 14, 2017
Ross Stevens, Ph.D., Joshua Zwick, Randolph B. Cohen

Illuminating the Path Forward


What goes through your head when you read words like Bitcoin, blockchain, distributed ledgers, or cryptographic one-way hash functions? For many, it’s a mix of bewilderment, skepticism, and a dash of curiosity.

There is no lack of headlines around Bitcoin, whether it's government hand-wringing over how it should regulate the market, or evangelists heralding its world-changing potential and the underlying technologies that power it. However, amidst the din of these headline-grabbing stories, we have yet to see a rigorous evaluation of the benefits of including Bitcoin as a long-term strategic holding in an investment portfolio. This paper changes that.

We believe that investors need to include a wider array of non-traditional return streams to meet their long-term investment objectives. Going forward, stocks and bonds alone won’t do it, and we believe that Bitcoin is one of the new return streams that should be considered. We believe that Bitcoin will not only play an important role in transforming how financial transactions are executed, but also in how investors store, protect, and grow their wealth.

There is something abstract and ethereal about Bitcoin which exists on a thing called a distributed ledger across a global network of computers. This currency does not represent an IOU of government, banks, or companies, and is not a precious metal you can hold in your hand. There is no legislative mandate that grants it status as legal tender, nor can people pay tax with it. At first glance, all of this makes it hard to rationalize its value. However, deeper thinking reveals that Bitcoin is no more abstract or ethereal than "traditional" financial assets today, including the balance in your bank account and the cash in your hand.


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