The concept of Bitcoin as the hurdle rate for investments has garnered significant interest and debate in the crypto community. This article explores what this idea entails and why opinions are divided on it.
What is the Hurdle Rate?
The hurdle rate indicates the minimum return that makes an investment or a project viable. It is used when deciding whether to start a business project or make an investment. To determine a hurdle rate, one considers costs, inflation, interest rates, and potential risks. Some companies use their weighted average cost of capital (WACC) as a reference for the hurdle rate.
Bitcoin as the Hurdle Rate
There are at least two messages attached to the ‘Bitcoin is the hurdle rate’ motto. First, proponents point to the poor performance of U.S. Treasury bills compared to Bitcoin’s performance. Second, some advocate for simply buying Bitcoin instead of seeking higher-performing investments. Bitcoin enthusiasts often emphasize its predictability and strong long-term appreciation, claiming it has never posted negative returns over a five-year period.
Debates Surrounding the Claim
Some Bitcoin purists criticize the notion that Bitcoin is the new hurdle rate, arguing that this implies merely holding Bitcoin leads to a loss if one cannot seek out better returns. They suggest that the idea might be leveraged for promoting certain stocks related to Bitcoin, presenting them as equally or more viable investments, diverting attention from potential risks.
The notion of Bitcoin as the hurdle rate serves both as an economic observation and a topic of lively discussion among proponents and skeptics alike. While many view Bitcoin as a reliable asset, concerns about the risks involved in holding and investing in it persist.
