Bitcoin
Fidelity believes investors should consider small exposure to Bitcoin for long-term portfolios
Fidelity Investments believes that a modest Bitcoin The (BTC) allocation could benefit investors regardless of their specific outlook on the digital asset, CNBC reported.
The asset manager’s head of digital asset strategies, Matt Horne, made the statement on June 5 during the 2024 Vision conference.
Horne said investors and advisors are diligently developing their crypto investment theories, but even a small portfolio allocation to Bitcoin may be prudent for many.
Persistent care
Horne elaborated that many investment managers and advisors are currently formulating their theses on Bitcoin and digital assets, but have not yet invested in them. He said Bitcoin’s track record is evidence that even a small exposure can bring big benefits to long-term portfolios.
According to Horne:
“Most investors are saving money, investing money with an advisor, to achieve some long-term goal [such as] retirement. 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.”
Spot Bitcoin ETFs were introduced to the US market almost six months ago. These funds were expected to be popular with counselors who preferred regulated investment vehicles for their high net worth clients.
However, many counselors remain cautiousciting high volatility, lack of understanding, regulatory uncertainty and lack of an extensive track record as reasons for their hesitation.
Horne addressed these concerns, saying:
“We spend a lot of time discussing disruptive technology [thesis] or venture investment or digital gold and I think yes to all of these is fine. What your thesis is will likely dictate position size and perhaps where you get it from in a portfolio.”
Financial advisors generally recommend allocating a small portion, between 1% and 5%, to Bitcoin to introduce some risk to a portfolio without burdening it with the crypto market’s notorious volatility.
Horne said that even if the price of Bitcoin fell sharply, a small exposure would not impact the broader portfolio. However, any appreciation in Bitcoin’s value would have a significant benefit based on its historical performance, however brief.
Brief history
Bitcoin’s journey began in 2009 when it was introduced by an anonymous figure known as Satoshi Nakamoto. Initially, it was largely ignored by mainstream investors and remained in niche communities.
It wasn’t until around 2015 that Bitcoin began to gain significant attention from the broader financial community, marking the beginning of its significant tracking period.
Since then, the flagship cryptocurrency has experienced extreme volatility, large price increases and significant drops, making it a challenging asset to model and predict.
Horne said that despite bitcoin’s relatively brief history – approximately 15 years, with significant data only available since 2015 – it is important for investors to educate themselves about the asset due to its impact on the financial landscape.
According to Horne:
“You just need to understand why you want to own this, understand the potential of this technology and then position yourself accordingly.”
However, he also warned that investors need to approach digital assets with a unique lens. Bitcoin’s unpredictable nature and short lifespan make it difficult to model with traditional financial tools.