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“Bitcoin is starting to become a benchmark asset for the younger generation,” said Anthony Pompliano, founder of Pump Investments. “We know that most investors cannot outperform their benchmarks, so adding new benchmarks to your asset allocation is the only way to catch up.”
Bitcoin rose to $49,000 on Thursday, the highest level since December 2021, but fell to about $43,000 on Friday. It soared 150% last year after a brutal sell-off in 2022.
A wide swath of the investment community missed out on the 2023 bull market. According to VanEck CEO Jan van Eck, many trustees, financial advisors and banks were told explicitly in the past not to touch cryptocurrencies, primarily due to their unregulated nature. .
That changed on Wednesday when the Securities and Exchange Commission authorized the sale of spot Bitcoin ETFs, allowing investors to access Bitcoin in the same way they buy stock or bond index funds. SEC Chairman Gary Gensler continues to issue stern warnings regarding crypto investing, but that doesn’t mean it’s deterring activity.
According to a recent prospectus, mutual fund manager Advisors Preferred Trust plans to invest up to 15% of its total assets in indirect Bitcoin exposure through funds and futures contracts for its Hundredfold Select Alternatives fund. % invested.
“Most passive funds are looking for ways to improve performance,” Pompliano said.
Bitwise Asset Management is one of 11 issuers granted initial approval for Bitcoin products. Chief investment officer Matt Hogan said the Bitwise Bitcoin ETF has a lowest fee of 0.2% of its holdings and primarily targets financial advisors and family offices.
”This includes RIAs [registered investment advisors] “This is a multi-trillion dollar market,” Hogan said, adding that advisors are “increasingly coming up with” allocations of 1% to 5%. I know they were waiting for an ETF. ”
In a recent survey of financial advisors conducted in collaboration with VettaFi, a data-driven ETF platform, Bitwise found that 88% of advisors interested in purchasing Bitcoin said they would wait until a Spot Bitcoin ETF is approved. I discovered what I was waiting for. Among advisors who have already invested in cryptocurrencies, large investments (more than 3% of their portfolio) will more than double from the previous year to 47% in 2023.
“For the vast majority of people, a low-cost Bitcoin ETF is going to be the easiest way to do that,” Hogan said.
According to Robinhood data, 81% of Bitcoin ETF trading volume in the first week was in personal accounts, with the rest in retirement accounts.
Even before the SEC’s Wednesday announcement, the 2022 CFA Institute Investor Trust Survey found that 94% of state and local pension plans have some kind of cryptocurrency exposure. New products may provide more legitimacy and cost savings for retirement plans that want to increase allocations.
Finance companies offer a range of advice on how best to enter this field.
In a report posted on its website in October, Galaxy Digital said the “strongest marginal improvement” occurred when the portfolio’s Bitcoin allocation went from 0% to 1%. As far back as 2019, WisdomTree found that adding Bitcoin to a portfolio that is traditionally 60% stocks and 40% bonds “can improve your risk-return profile,” and from 2014 to 2019, “with a 1% allocation… This led to an 8.3% outperformance.” Comparison with basic portfolio. ”
Analyzing its performance through mid-2022, Fidelity noted that “Bitcoin has boosted portfolio returns during certain periods in the past, but it has also been accompanied by significant volatility.” The company said that so far, Bitcoin has not performed well as a hedge against inflation, but “this has been difficult to assess given the low inflation throughout most of Bitcoin’s history.” Admitted.
Matt Walsh, founder of Castle Island Ventures, who previously led many of Fidelity Investments’ blockchain and crypto efforts, says the types of funds that will be the earliest to market are those focused on high-growth tech stocks. He said it is likely to become a fund. But he also sees broader appeal.
“I think you’ll see that in commodity-based portfolios as well, such as gold-based funds that see this as a kind of digital gold,” Walsh said.
clock: SEC approves Bitcoin ETF
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