With 2020 proving to be a year like no other in living memory, Dan Held of cryptocurrency exchange Kraken claims that buying Bitcoin is now ‘a crucial move’ for any diverse portfolio.
And who could argue with him? We’re living in uncertain times, and Bitcoin’s non-correlation with traditional assets must appeal to institutional investors.
Bitcoin In Your Portfolio Is Crucial, Especially In Uncertain Times
With all the market uncertainty, and the Fed’s printing press working overtime, Bitcoin has steadily been cementing itself as a solid ‘other’ option.
We are seeing this with increased interest from the Wall Street legends such as Paul Tudor Jones, who has openly said it was time to get involved with Bitcoin.
And as the troubled times continue, and further expected spikes in coronavirus the macro-economic situation is fragile.
This led Kraken’s Director of Business Development, Dan Held to say the uncertainty warrants intelligent investments and that an investment in ‘some sort of gold substitute is totally rational.’
Held noted that for a traditionally designed investors’ portfolio adding Bitcoin was an extremely crucial move for most investors in today’s market, especially in these uncertain times.
No doubt, Bitcoin has proven itself to be a trust-worthy gold substitute, although Peter Schiff begs to differ.
A Portfolio With Bitcoin Would Be More Stable
Held went on to say that a portfolio with Bitcoin in it would be more stable.
‘I mean, you can think about it as well as portfolio protection,’ said Held. ‘Bitcoin isn’t very correlated with the existing financial markets, especially like equities. So if they start to move, Bitcoin might move differently.’
Held used the Modern Portfolio Theory to back up his claim, which states that risk-averse investors should construct portfolios based on a given level of market risk.
And with all the instability in every market, surely a diversified portfolio with a hedge against the traditional investments makes sense.
Bitcoin Is The Best Performing Asset In The Last 10 Years
Bitcoin is the best performing asset of the last ten years, and it’s a non-correlated asset: critical for any diverse portfolio.
This alone should reduce the risk and increase the returns of any portfolio, according to the modern portfolio theory.
Bitcoin has an asymmetric return profile, meaning there is much more upside than downside with owning it.
And if anyone owns just a small portion, say 5% of their portfolio, it would have a huge impact on their gains if Bitcoin was to grow to anywhere near the market cap of gold.
However, it would a minimal negative impact if Bitcoin was to go to zero.
Time To Back The Fastest Horse: Bitcoin
As mentioned, we already saw famed investor, Paul Tudor Jones say it was time to back the ‘fastest horse’ saying it was a hedge against the Federal Reserve’s induced inflation.
Tudor Jones said, ‘The best profit-maximizing strategy is to own the fastest horse… If I am forced to forecast, my bet is it will be Bitcoin.’
‘We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money unlike anything the developed world has ever seen.’
Huge words from the hedge fund king, and it comes after he also famously said ‘capitalism needed modernizing.’ Maybe Bitcoin is what he meant.
Bitcoin Is Crucial For The Modern Portfolio
Bitcoin was born because of the uncertainty and bank manipulation, and its benefits are made more evident in times of uncertainty.
Bitcoin is crucial for any modern portfolio, and we see this ring true as more traditional investors park money into Bitcoin.
Dan Held is a Bitcoin bull no doubt, but his words ring true among, not just the Bitcoin community, but many macro investors.
In these times of uncertainty, and as investors follow the likes of Paul Tudor Jones into buying Bitcoin, the modernization of capitalism might already be underway.
Author: Tommy Limpitlaw