Fidelity Investments believes that a modest Bitcoin (BTC) allocation could benefit investors regardless of their specific perspectives on the digital asset, CNBC reported.
The asset manager’s head of digital wealth strategies, Matt Horne, made the statement on June 5 at the 2024 Vision conference.
Horne said investors and advisors are diligently developing their crypto investment theories, but even a small portfolio allocation to Bitcoin could be sensible for many.
Continued caution
Horne explained that many investment managers and advisors are currently formulating their thesis on Bitcoin and digital assets, but have yet to invest in them. He said Bitcoin’s track record is proof that even a small exposure can have big benefits for long-term portfolios.
According to Horne:
“Most investors save money and invest money with an advisor to achieve a longer-term goal [such as] pension. A non-zero position in something like bitcoin could make sense for many clients given a long-term horizon [and] positioning appropriate to their risk.”
Spot Bitcoin ETFs were introduced to the US market almost six months ago. These funds were expected to be popular among advisors who preferred regulated investment vehicles for their high net worth clients.
However, many advisors remain cautious, citing high volatility, a lack of insight, regulatory uncertainties and the lack of an extensive track record as reasons for their hesitation.
Horne addressed these concerns by saying:
“We spend a lot of time discussing the disruptive technology [thesis] or venture investing or digital gold and I think yes to all of those things is fine. What your thesis is will likely determine position size and perhaps where you source it from in a portfolio.
Financial advisors generally recommend allocating a small portion, between 1% and 5%, to Bitcoin to introduce some risk to a portfolio without overwhelming it with the crypto market’s notorious volatility.
Horne said that even if the Bitcoin price drops dramatically, a small exposure would not impact the broader portfolio. Meanwhile, any increase in Bitcoin’s value would provide a significant upside based on its historical performance, no matter how short.
Brief history
Bitcoin’s journey began in 2009 when it was introduced by an anonymous figure known as Satoshi Nakamoto. Initially, it was largely overlooked by mainstream investors and remained within niche communities.
It wasn’t until around 2015 that Bitcoin began to receive significant attention from the broader financial community, marking the beginning of its meaningful tracking period.
Since then, the flagship crypto has experienced extreme volatility, massive price increases, and significant declines, making it challenging to model and predict.
Horne said that despite Bitcoin’s relatively short history – about 15 years, with meaningful data only available since 2015 – it is important for investors to educate themselves about the asset because of its impact on the financial landscape.
According to Horne:
“You just have to understand why you would want to own this, understand the potential of this technology and then position yourself accordingly.”
However, he also cautioned that investors should approach digital assets with a unique lens. Bitcoin’s unpredictable nature and short lifespan make it difficult to model with traditional financial instruments.