Despite the 2018 bear market, market players continued to support the effort to adopt cryptocurrencies. And despite the headwinds, those who our posts on Medium and fully understood what lies behind the world of cryptocurrencies were sure that crypto would survive. In 2020, even those who were skeptical are understanding this.
One of the reasons why market players include Bitcoin in their investment choices is because it will improve their overall performance. Cryptocurrencies are not related to canonical markets. In other words, their movements are not related to the stock market or general economic cycles. And institutional investors are now realizing that Bitcoin’s price is not related to the prices of gold, stocks, bonds or commodities.
That’s why it’s valuable for all these players. A study conducted by Bitwise Asset Management has concluded that the allocation of 1–10% of one investments in Bitcoin offers more than risk-adjusted returns compared to those who own stocks and bonds. An unrelated asset works well in different market conditions and improves overall performance, while reducing volatility across the entire portfolio.
This does not mean that we will not witness those rare occasions when Bitcoin will move in the same direction as other assets. For example, we saw how it happened during the sell-off in the midst of the COVID-19 crisis. There has been a great impetus to seek liquidity to meet margin demands and almost all assets, including Bitcoin, have been sold. But apart this episode, there is little correlation between Bitcoin and other assets. And that’s why we’re seeing important people like Paul Tudor Jones buying Bitcoin.
Tudor Jones is the founder of Tudor Investment Corporation, which today manages approximately $40 billion in assets. He himself is worth over $5 billion. And last month he announced that he was allocating 2% of his personal investments in Bitcoin. Needless to say, people like Paul Tudor Jones do their due diligence before diving into such investments. And they see Bitcoin as an unrelated asset with phenomenal upside potential.
According to a recent Fidelity Investments survey, 36% of investors in the United States and Europe have investments in cryptocurrencies. And within five years, 91% of them are willing to increase the weight of digital assets in their portfolio. If you pay attention to this latter figure, you will notice the surprising maturation of Bitcoin, given that only four years ago such an opinion was somewhat unthinkable. Bitcoin is becoming a central resource among money managers and, over time, it will be owned by practically all these financial figures.
Wall Street traders will also help this adoption. So far they have stood by while their rivals like Binance and Coinbase have made billions in fees only.
Wall Street is eyeing those profits and we know how voracious its greed is. This will help promote the virtues of diversification through Bitcoin, so that we can highlight the existence and usefulness of Bitcoin in the eyes of millions.
We are only at the beginning of the largest capital allocation ever seen for a new asset.