Even at the height of its meteoric gains a few years ago, Bitcoin was not as good of an investment as a portfolio loaded with the so-called FAANG stocks, which include technology giants such as Facebook, Apple, Amazon, Netflix, and Google. According to a recent study conducted by a major cryptocurrency news publication, the network effect of Bitcoin pales in comparison to what the FAANG companies have to offer.
To understand the network effect, one must consider how much value is created by users who continue to use a service such as the various social networks owned by Facebook, which include Instagram and WhatsApp. There is no question that Facebook increases exponentially in value as more users install Instagram and Facebook Messenger apps on their smartphones, but the same cannot be said about Bitcoin and other digital currencies.
Even though not all investors apply the network effect rationale when they acquire FAANG stocks, they have some idea about increased growth boosting the value of their shares; this is certainly the case with Netflix although the company releases limited information in this regard. Considering that a segment of investors who are part of the Millennial Generation prefer digital currency tokens to FAANG stocks, it is important to note that they could be missing out on good investments, particularly because Facebook and Google may launch their own blockchain projects in the future.
Looking back at the cryptocurrencies market in early 2017, investors who took a chance on Bitcoin and Ripple tokens were able to realize significant returns on their investments, but FAANG traders were better off not just in terms of gains but also risk tolerance. Bitcoin would be a phenomenal investment, but the high volatility diminishes its profile as a smart investment.
Even the most volatile FAANG stock, which happens to be Facebook, doesn't come close to Bitcoin in terms of volatility. Risk must be taken into account when evaluating investments, and this has always been a problem with Bitcoin. There was a time when digital currencies were better investment options than FAANG stocks, but that has not been the case since 2017.