There’s more to Bitcoin than just its huge upside potential.
In 2024, a surprising number of billionaires became bullish on Bitcoin (BTC 0.69%). Some of them are billionaire hedge fund managers. Some are technology entrepreneurs and industry leaders. And there are even billionaire real estate moguls turned politicians who have made Bitcoin a campaign issue.
This sudden bullishness around Bitcoin is somewhat surprising given that just a few years ago, many of these same billionaires were publicly saying that Bitcoin was never something they would invest in. be. So, what has changed in order to convince them to invest between now and then? Would you like to buy Bitcoin?
The rise of Bitcoin as a new asset class
A key change is the growing recognition that Bitcoin is a separate asset class, in the same way as stocks, bonds, commodities, and real estate. This shift in thinking, which began to take hold during the last crypto bull market rally, has important implications for portfolio management. This means that if you are looking to optimize the risk-reward profile of your portfolio, you should consider allocating at least a small portion to Bitcoin.
But how big should your allocation be? If you want to play it safe, 1% is plenty. In fact, even billionaire hedge fund managers seem to limit their overall exposure to 1%. However, Fidelity Investments recently suggested that a range of 2% to 5% could be reasonable for aggressive investors. And Ark Invest’s Cathie Wood even suggested earlier this year that she wanted to increase that ratio to 19.4%.
A new way to invest in Bitcoin
However, this shift in thinking about Bitcoin as an asset class is only part of the story. The launch of a new Spot Bitcoin ETF in January also played a key role in attracting new billionaire investors. These new ETFs have given investors the opportunity to easily and conveniently add Bitcoin to their portfolios.
Image source: Getty Images.
Suddenly, modern portfolio theory became more than just a theory. New ETFs now allow you to allocate a portion of your portfolio to Bitcoin to get the right risk-reward profile. This allocation can be adjusted without entering the (sometimes confusing) cryptocurrency market.
“Digital gold” theory becomes mainstream
For years, cryptocurrency enthusiasts have talked about Bitcoin as “digital gold.” They argued that it could be a safe asset in times of economic or geopolitical uncertainty. And now this idea is becoming increasingly mainstream among the billionaire investor class. What do you buy when the world seems to be teetering on a cliff? A few years ago, the answer would have been gold. Today, the answer may be Bitcoin.
For example, in July, tech billionaire Mark Cuban outlined two potential risk scenarios for adding Bitcoin to his portfolio. One is geopolitical risk, or the risk that missiles could start flying in some parts of the world. and the other involves inflation risks and a potential devaluation of the US dollar. In either scenario, Cuban says it makes sense to own Bitcoin.
Bitcoin’s Rise Potential
Until now, I haven’t even mentioned the potential for Bitcoin’s rise. And that’s why this debate is so strong, especially since tech billionaire Michael Saylor, founder and executive chairman of MicroStrategy (MSTR 8.02%), currently has a Bitcoin price prediction of around $13 million. Because it seems easy. Besides Nvidia and other high-flying tech stocks, what other asset in the world has the potential for Bitcoin’s upside?
Bitcoin is already up 45% in 2024 and remains one of the best-performing cryptocurrencies of the year. Combine this with the fact that Bitcoin has been the world’s best-performing asset in seven of the past 10 years, and you wonder why billionaires are so interested in increasing their exposure to this cryptocurrency. It’s easy to understand what’s going on. And Bitcoin’s historical performance dates back more than a decade, giving us confidence in our data.
But is Bitcoin right for you?
What makes Bitcoin particularly unique is that it has two properties that are highly sought after by investors around the world: long-term upside potential and downside risk protection. The world has never seen anything like Bitcoin, and even the brightest minds on Wall Street are having a hard time understanding it.
For example, BlackRock’s new white paper states that Bitcoin can be both a “risk-on” and “risk-off” asset. And last year, Ark Invest’s Cathie Wood suggested that Bitcoin is a rare asset that can perform well in both inflationary and deflationary economic environments.
If that’s indeed the case, it’s easy to see why investors should allocate at least a small portion of their portfolio to Bitcoin. The new Spot Bitcoin ETF makes it easy to add Bitcoin to your portfolio in the time it took you to read this article.
