Bitcoin’s Role in an Average Investor’s Portfolio: Questionable or Essential?
Despite Bitcoin’s impressive performance this year, its position in an average investor’s portfolio is still a matter of debate. Financial analyst and crypto advisory expert Aaron Brown argues that Bitcoin’s uncertain correlations with traditional asset classes make it an odd fit alongside stocks, currencies, or gold.
Is Bitcoin’s Volatility a Positive Aspect?
Bitcoin has experienced a 160% increase since the beginning of the year, recovering from losses suffered during last year’s aggressive interest rate hikes by the Federal Reserve. Brown notes that Bitcoin typically takes around nine months and twenty-one days to double in value since 2014. However, its volatility has been unexpectedly low since March, despite industry scandals, hacks, and regulatory pressure.
Brown acknowledges that Bitcoin has the potential to attract investors due to its appreciation potential, but its unpredictable behavior during fundamental market events can be intimidating for those who are unable or unwilling to respond to price changes.
Skepticism Among Average Investors
Average investors’ skepticism is reinforced by on-chain data. Glassnode analyst James Check suggests that there is currently very little market “mania” among investors at the $44,000 level compared to three years ago. Bloomberg blockchain analyst Jamie Coutts also points out that Bitcoin’s illiquid supply levels indicate a higher level of conviction among investors.
Bitcoin’s Value Proposition
In terms of fundamental value, Bitcoin’s place is still questionable. It has struggled to gain adoption as a transactional currency compared to fiat or stablecoins. Additionally, there is inconsistent demand for tools in the crypto economy that Bitcoin provides access to.
However, Bitcoin has made progress on the regulatory front, with traditional and regulated financial services now available for the asset. Issues regarding tax treatment and legality have largely been resolved, and the approval of a Bitcoin spot ETF appears likely next month.
Hot Take: The Importance of Allocating to Bitcoin
In conclusion, Aaron Brown suggests that even traditional investors who are skeptical about crypto should consider including a small allocation to Bitcoin in their portfolios. While there is still a possibility that cryptocurrencies could lose all value, the potential upside is significant enough that ignoring Bitcoin would create an unbalanced portfolio.
By
By
By
By
By