Here’s the guide to how Bitcoin will shape investors’ portfolios next year
The past year has had people talking about crypto like never before. Earlier this year, Cathie Wood, CEO of Ark Invest redefined her company’s portfolio by exploring Bitcoin and Ethereum in a 60-40 split.
However, not everyone wants to stick to that formula. In a recent interview, Reddit co-founder Alexis Ohanian opined that the technology underlying crypto is here to stay. In the context of investing, he said,
“Alternative assets as a whole are going to be a big part of people’s portfolios in the future. And the next generation is not going to think about stocks and bonds, the way the 60-40 sort of split used to be, at least how it was positioned to me as a kid.”
Here, it’s worth noting that Josh Brown, CEO of Ritholtz Wealth Management, had commented previously that an 80-20 portfolio is the new 60-40 portfolio. In fact, he predicted that “probably $1 trillion” worth of wealth management funds will be invested in crypto-assets in 2022.
However, after the emergence of the Covid Omicron variant, investors have shied away from riskier investments for the time being. Brian Kelly, CEO and founder of digital currency investment firm BKCM, told CNBC,
“With omicron coming along and the U.S. economy stalling a bit, a lot of macro funds that use bitcoin as this pro-cyclical inflation hedge have decided to take profits throughout December.”
Interestingly, investors continue to invest in crypto-ETFs as volatility grips the sector, according to another report. For example, Todd Rosenbluth, Head of ETF and mutual fund research at CFRA, told Bloomberg that there has been “pent-up demand” for Bitcoin-based ETFs with a “favorable long-term view” of the asset class.
“Investors have stayed loyal in the past month and likely will into 2022.”
In 2022, Bloomberg’s Mark Gilbert is also seeing Bitcoin as a spice maker to the good old 60-40 portfolio. Something that has essentially decided allocation to equity and debt in a portfolio in the past. He noted,
“Bitcoin, which in theory is uncorrelated to either asset class, could provide an alternative ingredient for investors to be able to stomach its volatility.”
Having said that, on the Bitcoin correction front, Ohanian also explained that big technological shifts are often followed by consolidation. He added that there are only a handful of very big winners while a lot of the companies fade in the process. Therefore, he advised,
“It’s incumbent to do the work, do the research, and really be looking towards the long term if you’re looking anywhere in this space.”