Why Analysts Advise Investors to Stay Away from Bitcoin
Bitcoin has reached new heights in the cryptocurrency market, prompting financial analysts to discuss how to navigate the big picture. Meanwhile, investors debate on how much further the asset can climb. Senior Financial Technology Analyst Dan Dommiso and BitGo Managing Director Matt Bwig agree that while Bitcoin has potential, it is not a reliable investment option.
Stay Away from Bitcoin
Dan Dommiso advises investors to stay away from Bitcoin because, in his view, there is no reason for people to invest in it. He cites the following reasons:
Coinbase is a take rate business, and take rates are always bound to competition and pricing pressures.
Coinbase is already giving out pricing concessions; in January 2021, they lowered pricing for people trading over $500,000.
There is increasing competition, making Coinbase’s survival even harder.
Regardless of his bullish sentiments, Dan Dommiso thinks that Bitcoin is not a sound investment option, and his buy rating on block is not because of the cryptocurrency tie-in.
Matt Bwig also thinks Bitcoin’s recent rally is a global shift in portfolio construction. More people can buy Bitcoin through their brokerage accounts, and institutions have started to pile in using the nine new Bitcoin ETFs. However, investors should consider the following:
Investing through ETFs, looking for the counterparty, and looking at the underlying platform’s volatility and fees.
Bitcoin: A Generational Shift
Matt Bwig thinks that Bitcoin is a generational shift that institutions and retail markets will view differently. Bwig believes that pulling back on BTC could happen due to increased funding rates and requirements for more leverage.
With the endorsement of Bitcoin by two of the largest asset managers in the world, Fidelity and BlackRock, it has dramatic implications on how asset managers and hedge funds will think about cryptocurrency in portfolios.
Hot Take: Analysts Advise Caution Due to Bitcoin’s Risks
While investors have piled into Bitcoin due to its recent gains, financial analysts warned investors to stay away because of its inherent risks. Although the risks seem reasonable, it doesn’t mean that Bitcoin should be avoided altogether. Investors must research and assess Bitcoin’s risks before deciding to invest in it.
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