Bitcoin has proven to be the optimal store of value in today’s world. In this digital age, everyone wants to own some form of digital asset. To what extent this is reflected in investor behavior is worth investigating.
The 60/40 allocation is known to have been one of the most widely used strategies in terms of portfolio construction. Will Bitcoin Change That? Or will investors be wary of cryptocurrencies forever?
Bitcoin is everywhere
It is noteworthy that the crypto market has successfully attracted mainstream investors over time, including former skeptics. In fact, Bitcoin has become one of the most sought-after assets among investors. As a result, the age-old discussion about the 60-40 portfolio strategy is changing as Bitcoin also becomes mainstream.
The 60/40 portfolio is a traditional investment structure with total investments split into 60% stocks and 40% bonds. This helps to reduce the risks to a minimum.
However, Bitcoin now offers strong ROIs. Ergo it is suggested that a 5% There should also be an assignment. Another reason is that BTC delivers higher returns than bonds (BND) and stocks (VOO).
Additionally, Bitcoin also appears to be doing better than bonds and stocks in terms of growth and returns.
But then there is a certain amount of speculation here. And you have to deal with that. For example, what would happen if people moved away from the stock market? If an ETF is listed tomorrow, will it pull investors away from large and small stocks?
No reason to worry?
In an exclusive interview with AMBCrypto, Chief Income Strategist of the Oxford Club, Marc Lichtenfeld gave an insight into the effects of such portfolio diversification. Bitcoin, in his opinion, will not pose a threat to the stock markets.
Lichtenfeld believes the crypto market is not threatening the stock market because people still don’t see it as a financial instrument. It is considered more useful to cyber criminals, which is why people are currently refraining from investing in it.
If a Bitcoin ETF is listed in the future, it will not hurt the other small companies that are listed on exchanges. This is because, in relative terms, these companies will be more trustworthy.
Here, too, participation is an important factor, according to the strategist. Therefore, the stock market is not affected by the crypto market, as participation in the latter is still lacking. For example, people refrain from opening an account with Coinbase due to complex processes and their lack of understanding and the fear of possible use by criminals.
Even so, many companies benefit from the crypto hype by either buying Bitcoin or by announcing their purchase intentions. This could also attract more investors into the market, the analyst added.
Adding Bitcoin to its portfolio offers higher returns. In addition, as the strategist pointed out, it is unlikely to harm the rest of the portfolio, which is made up of bonds and stocks.