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A small stake in bitcoin makes sense regardless of the cryptocurrency’s thesis, says Fidelity
According to an executive at Fidelity Digital Assets, some investors may be trying too hard to understand Bitcoin and missing an investment opportunity in the process. Matt Horne, head of digital asset strategies at the firm’s custody and trading division for institutional investors, said investors and advisors are busy sharpening their cryptocurrency thesis when a small portfolio allocation is likely appropriate for them , regardless of their thesis. “You may have more investment thesis on bitcoin, and that’s fine,” Horne said Monday at the Vision 2024 conference, a cryptocurrency investment conference for advisors hosted by the Digital Assets Council of Financial Professionals in Austin, Texas. “Most investors save money, invest money with an advisor, to achieve long-term goals [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 their risk.” Bitcoin ETFs arrived on the U.S. market nearly six months ago. Advisors who needed regulated funds like bitcoin ETFs to direct their wealthy clients to invest in bitcoin represented a big argument in favor of the funds. So far, however, many have avoided taking action for several reasons, ranging from high volatility to mistrust and lack of understanding of the asset class, to regulation and lack of track record time to discuss this disruptive technology [thesis] or venture investing or digital gold and I think yes all of those are good,” he added. “Your thesis will probably dictate position sizing and maybe where you source it from in a portfolio.” BTC.CM= YTD mountain Bitcoin ( BTC) year-to-date Investors and asset managers who feel comfortable valuing bitcoin generally recommend a small allocation between 1% and 5% to add risk to a portfolio without subjecting it too much to the cryptocurrency’s infamous volatility (at worst of cases) goes to zero, the impact on the broader portfolio is minimal due to the size of the condition,” Horne said. “If it does what many of us expect, which is to make money over time, then you want to make sure that your customers have some of that visibility there.” The Fidelity executive acknowledged that bitcoin’s short lifespan — it’s about 15 years old and, even so, only the years after 2015 are probably worth tracking — makes it virtually “impossible” to model it. that’s fine too, he said. The key is for advisors and investors to seek education on this new investment arena. “It’s difficult because many professional investors are able to model every situation [other] given the amount of data we have at our fingertips now,” he said. “With digital assets, you can’t afford luxury… and I think that’s fine,” he added. “That’s why you just have to understand why you may want to own it, understand the potential of this technology, and then position yourself accordingly.”