Despite Bitcoin (BTC)’s stellar performance this year, its role in an average investor’s portfolio is still questionable, according to Bloomberg.
In an opinion piece published for the outlet on Friday, financial analyst and crypto advisory expert Aaron Brown said the asset’s dubious correlations to traditional asset classes leave it out of place when bought alongside stocks, currencies, or gold.
Is Bitcoin’s Volatility A Good Thing?
BTC is up 160% since the start of the year, rebounding from losses suffered last year alongside virtually all other assets during historically aggressive interest rate hikes by the Federal Reserve.
According to Brown, that’s mostly standard behavior for BTC, which has taken an average of nine months and twenty-one days to double in value since 2014. Its volatility since March, however, has been uncharacteristically low, even amid plentiful industry scandals, hacks, and aggressive regulatory pressure.
“Bitcoin has more than enough appreciation potential to attract investors, and its volatility no longer seems to be a disqualification,” Brown noted. Nevertheless, its unpredictable behavior around fundamental market events makes it a scary prospect for those who can’t or won’t respond to regular price changes.
Average investors’ present skepticism is reinforced by on-chain data. According to Glassnode analyst James Check earlier this week, there is very little market “mania” among investors at $44,000 this year compared to almost three years ago.
On Thursday, Bloomberg blockchain analyst Jamie Coutts said that Bitcoin’s illiquid supply levels suggest a “much higher base level of conviction” among investors.
Bitcoin’s Value Proposition
Even in terms of fundamental value, the analyst finds Bitcoin’s place is questionable: its failed to gain adoption as a transactional currency compared to fiat or stablecoins, and there is inconsistent demand for tools in the crypto economy to which BTC offers access.
That said, Bitcoin is making progress on the regulatory front, with traditional and regulated financial services like options, lending, and custody now available for the asset. Issues around tax treatment and legality appear mostly solved, and approval of a Bitcoin spot ETF seems all but certain by next month.
In conclusion, Brown stated:
“We are close to the time when even very traditional investors, generally skeptical about crypto, should accept that it’s safer to have a small allocation to Bitcoin than to ignore it. Crypto might still all go to zero, but there’s enough potential upside that no exposure is an unbalanced portfolio.”
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