Fidelity Digital Assets – Bitcoin Investment is Worth the Risk for Funds
Fidelity Digital Assets, in a recent report titled “Bitcoin Investment Thesis,” explained how portfolio managers could boost their returns by setting aside a share of their investments in Bitcoin (BTC).
The report also forecast that in the coming months a surge in institutional buying could propel Bitcoin’s market cap by hundreds of billions of dollars.
To back the theory, Fidelity created sample portfolios by allocating 60% and 40% virtual cash for equities and fixed income instruments. The portfolio was then diversified by investing 1% to 3% of the total virtual funds in Bitcoin.
In various simulated environment, as per Fidelity, the portfolio holding higher number of Bitcoins eclipsed the performance of portfolios holding lower quantities of Bitcoin.
Furthermore, assets that have negative correlation or demonstrate low correlations with the market offer increased advantages to portfolio managers. They enable control over volatility without a need to forego returns.
Simulated portfolios holding Bitcoin gained from the numero uno currency’s lack of correlation with conventional assets. Nevertheless, the report accepted that the rising trend of Bitcoin adoption by the financial sector may pave way for an increase in correlation in the forthcoming years, thereby minimizing advantages of portfolio diversification.
Fidelity’s report further assessed the impact of shifting funds from other alternative investments and fixed income assets to Bitcoin. Even if Bitcoin attracts 5% to 10% of funds invested in alternative investment market, which is valued at $13.40 trillion, the market cap of the numero uno crypto will increase to a range of between $670 billion and $1.30 trillion.
The bond market is roughly worth $50.30 trillion. If Bitcoin attracts 1% of bond market investments, it would increase Bitcoin’s market cap by $500 billion.
The continuous decline in bond yields, the document argues, could force asset managers to look at alternative assets. If the positive predictions come true, Bitcoin’s market cap could reach $2 trillion.