Bitwise executives say that financial advisors have been considering a larger allocation to bitcoin due to an ever-changing macroeconomic landscape and an anticipated shock in supply and demande of the asset.
Ryan Rasmussen is a Bitwise Research Analyst. He told Blockworks: “Advisers who are interested in crypto generally consider an allocation of between 1% and 5 percent to their portfolio.” It was historically at the lower end, as stocks and bonds were attractive.
But professional asset allocators are looking to hedge against risks of rising inflation, economic uncertainty and geopolitical conflict, he added — noting that more are viewing it as a “chaos-resilient” asset.
“Currently, there are limited appealing alternatives to gold, but bitcoin shares similar qualities while offering the opportunity for advisers to add some alpha to their client’s portfolios,” Rasmussen said.
The two-thirds rule “several” asset allocators Rasmussen chatted with — including independent financial pros and others part of large networks and registered investment advisers (RIAs) — are thinking about upping their current allocations to 5% or more, Rasmussen told Blockworks. Many are thinking about investing in the stock market for the first.
Bitcoin’s price was roughly $34,000 at 12:30 pm ET on Friday — up about 15% from seven days ago.
Larry Fink said that earlier this month, the CEO of asset-management giant Asset Management Group, Larry Fink, stated there was “pent-up interest” In crypto. He stated that he believed crypto would play an important role in the future. “flight to quality” Gold and US Treasury notes are a great combination.
Mike McGlone is a senior commodities strategist at Bloomberg Intelligence. He stated in a research report published Oct. 25, that the decline of gold ETF shares was causing concern. “may suggest room is being made for US-based spot bitcoin ETFs.” Bitcoin is still a currency “quite risky” At 3.5x the volatility of Gold, he said.
Impact of BTC ETFs
A January VettaFi/Biwtise survey found that, while 90 percent of asset managers receive crypto-related inquiries from their clients, only 15 percent allocate assets.
Roughly one-third of respondents indicated that the introduction of a bitcoin ETF on spot would allow them to feel more confident about investing in crypto.
Rasmussen says that advisers have begun to recognize the effect the launch of potential spot bitcoin exchange-traded funds (ETFs) and the reduction in the block rewards per bitcoin miner could have on asset prices.
Bitwise, BlackRock and others are currently seeking approval for funds that would hold bitcoin directly — a type of product the US Securities and Exchange Commission has never permitted to start trading. Grayscale Investments’ court victory against the SEC, and the apparent dialogue that is ongoing with both issuers as well as the regulator have led some to be more optimistic about the launch of these funds in the months ahead.
“Bitcoin is a commodity whose price is set by supply and demand,” Rasmussen said. “There’s going to be more demand next year when an ETF launches and the future supply is falling.”
According to a Bitwise report published in August, a 2.5% bitcoin allocation would have increased by 12 percentages points the return on a portfolio that allocated 60% of its assets to stocks and only 40% to bonds over three years.
Rasmussen explained that an allocation of 5% can have both a small impact on the volatility of a portfolio and a large impact on its risk-adjusted return.
“At the same time, a 5% allocation will not blow a portfolio up if crypto underperforms,” “He said” “In other words, it’s all about position sizing relative to the opportunity, and advisers increasingly see bitcoin as a very compelling opportunity.”
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