Bitcoin
Small Bitcoin Holding Could Make Sense Regardless of Cryptocurrency Thesis, Fidelity Says
Some investors may be trying too hard to understand bitcoin and missing an investment opportunity in the process, according to an executive at Fidelity Digital Asset Management. Matt Horne, head of digital asset strategies at the firm’s digital asset management arm, said investors and advisors are busy honing their cryptocurrency thesis when a small portfolio allocation is likely appropriate for them, regardless of their thesis. “You could have multiple investment theses in bitcoin, and that’s fine,” Horne said Monday at the 2024 Vision conference, a crypto investment conference for advisors organized by the Digital Asset Financial Professionals Council in Austin, Texas. “Most investors are saving money, investing money with an advisor, to achieve some long-term goal [such as] retirement,” Horne added. “A non-zero position in something like bitcoin could make sense for many clients given a long-term horizon [and] position sizing appropriate to your risk.” Bitcoin ETFs hit the US market nearly six months ago. Advisors who needed regulated funds like bitcoin ETFs to direct their wealthy clients to invest in bitcoin made a great case for the funds. Until now, however, many have avoided intervening for a variety of reasons, ranging from high volatility, to distrust and lack of understanding of the asset class, to regulation and a lack of track record. “We spend a lot of time discussing disruptive technology. [thesis] or venture investing or digital gold and I think yes to all of that is fine,” he added. “What your thesis is will probably dictate position size and perhaps where you get it from in a portfolio.” BTC.CM = accumulated mountain year-to-date Bitcoin (BTC) Investors and wealth managers comfortable valuing bitcoin often recommend a small allocation of between 1% and 5% to add risk to a portfolio without subjecting it to the cryptocurrency’s notorious volatility (in general). worst case scenario) goes to zero, the impact on the broader portfolio is minimal because of the size of the condition,” Horne said. “If you do what many of us hope, win over time, then you want to make sure your customers have some of that exposure there.” The Fidelity executive acknowledged that bitcoin’s short lifespan — it’s about 15 years, and even then, it’s probably only worth tracking in the years after 2015 — makes it virtually “impossible” to model. But that’s okay too, he said. The key is for advisors and investors to seek education in this new area of investing. “It’s difficult because many professional investors are able to model each [other] asset class, given the amount of data that is at our fingertips right now,” he said. “With digital assets, you don’t have the luxury… and I think that’s okay,” he added. “That’s why you just you need to understand why you might want to own this, understand the potential of this technology and then position yourself accordingly.”