Research Study

Bitcoin First Revisited

Why investors need to consider bitcoin separately from other digital assets

by Chris Kuiper and Jack Neureuter


In January 2022, we outlined Bitcoin’s unique characteristics, why they make Bitcoin fundamentally different from other digital assets, and why this is important for investors to consider. Over a year and a half later, Bitcoin continues to gain adoption and market share in the digital asset space, while other digital assets have faced separate headwinds. While we encourage those seeking a detailed understanding of Bitcoin’s unique value propositions to read the earlier overview, we aim to reiterate many of Bitcoin’s fundamental advantages below while contextualizing Bitcoin’s progress and position within today’s current digital asset market. 

Executive Summary 

Once investors have decided to invest in digital assets, the next question becomes, “Which one?” Of course, bitcoin is the most recognized, first-ever digital asset, but there are hundreds—even thousands of other digital assets in the ecosystem. 

One of the first concerns investors have regarding bitcoin is, as the first digital asset, it may be vulnerable to innovative destruction from competitors (such as the story of MySpace and Facebook). Another common consideration surrounding bitcoin is whether it offers the same potential reward or upside as some of the newer and smaller digital assets that have emerged. 

In this paper, we propose: 

  1. Bitcoin is best understood as a monetary good and one of the primary investment theses for bitcoin is as the store of value asset in an increasingly digital world. 
  2. Bitcoin is fundamentally different from any other digital asset. No other digital asset is likely to improve upon bitcoin as a monetary good because bitcoin is the most (relative to other digital assets) secure, decentralized, sound digital money and any “improvement” will potentially face trade-offs. 
  3. There is not necessarily mutual exclusivity between the success of the Bitcoin network and all other digital asset networks. Rather, the rest of the digital asset ecosystem can fulfill different needs or solve other problems that bitcoin simply does not. 
  4. Other non-bitcoin projects should be evaluated from a different perspective than bitcoin. 
  5. Bitcoin should be considered an entry point for traditional allocators looking to gain exposure to digital assets. 
  6. Investors should hold two distinctly separate frameworks for considering investment in this digital asset ecosystem. The first framework examines the inclusion of bitcoin as an emerging monetary good, and the second considers the addition of other digital assets that exhibit venture capital-like properties. 

The information herein was prepared by Fidelity Digital Asset Services, LLC (“FDAS LLC”) and Fidelity Digital Assets, Ltd (“FDA LTD”). It is for informational purposes only and is not intended to constitute a recommendation, investment advice of any kind, or an offer or the solicitation of an offer to buy or sell securities or other assets. Please perform your own research and consult a qualified advisor to see if digital assets are an appropriate investment option. 

Views expressed are as of 06/26/23, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. 

Accounts for and custody and trading of digital assets are provided by Fidelity Digital Asset Services, LLC, which is chartered as a limited purpose trust company by the New York State Department of Financial Services to engage in virtual currency business (NMLS ID 1773897). FDA LTD relies on FDAS LLC for these services. FDA LTD is registered with the Financial Conduct Authority under the U.K.’s Money Laundering Regulations. The Financial Ombudsman Service and the Financial Services Compensation Scheme do not apply to the cryptoasset activities carried on by FDA LTD. 

To the extent this communication constitutes a financial promotion in the U.K., it is issued only to, or directed only at, persons who are: (i) investment professionals within the meaning of Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”); (ii) high net worth companies and certain other entities falling within Article 49 of the FPO; and (iii) any other persons to whom it may lawfully be communicated. 

This information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Persons accessing this information are required to inform themselves about and observe such restrictions. 

Digital assets are speculative and highly violate, can become illiquid at any time, and are for investors with a high-risk tolerance. Investors in digital assets could lose the entire value of their investment. Digital Assets are not insured by the Federal Deposit Insurance Corporation (FDIC) or protected by the Securities Investor Protection Corporation (SIPC). Fidelity Digital Assets and the Fidelity Digital Assets Logo are service marks of FMR LLC. 

The price of bitcoin is volatile, and market movements of bitcoin are difficult to predict. Supply and demand changes rapidly and is affected by a variety of factors, including regulation and general economic trends. All investments will risk the loss of capital. Therefore, an investment in bitcoin involves a high degree of risk, including the risk that the entire amount invested may be lost. No guarantee or representation is made that investing in bitcoin will be successful. Bitcoin exchanges may suffer from operational issues, such as delayed execution, that could have an adverse effect. Several factors may affect the price of Bitcoin, including, but not limited to: supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of Bitcoin or the use of Bitcoin as a form of payment. There is no assurance that Bitcoin will maintain its long-term value in terms of purchasing power in the future, or that acceptance of Bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow. Bitcoin is created, issued, transmitted, and stored according to protocols run by computers in the Bitcoin network. It is possible the Bitcoin protocol has undiscovered flaws which could result in the loss of some or all assets held. There may also be network-scale attacks against the Bitcoin protocol, which result in the loss of some or all of assets held. Advancements in quantum computing could break Bitcoin’s cryptographic rules and consequently the reliability of the cryptography used to create, issue, or transmit bitcoin is not guaranteed. 

FDAS LLC and FDA LTD do not provide tax, legal, investment, or accounting advice. This material is not intended to provide, and should not be relied on, for tax, legal, or accounting advice. Tax laws and regulations are complex and subject to change. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. 

Fidelity Digital Assets and the Fidelity Digital Assets logo are service marks of FMR LLC. 

This material may be distributed through the following Fidelity Institutional entities, none of whom offer digital assets nor provide clearing or custody of such assets: Fidelity Distributors Company LLC; National Financial Services LLC or Fidelity Brokerage Services LLC. 

Fidelity and the third parties listed here are independent entities and not affiliated. Listing them does not suggest a recommendation or endorsement by Fidelity. 

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