Billionaires have accumulated Bitcoin (BTC) in the past few months. Under the leadership of Paul Tudor Jones, hedge fund manager Stanley Druckmiller is the youngest billionaire to publicly announce his Bitcoin investment.
Bitcoin’s performance since 2015. Source: TradingView.com
Four main reasons Bitcoin is more attractive to wealthy investors. The reason is Bitcoin’s effectiveness as a tool to diversify investment portfolios, hedge against inflation, as an alternative to gold and as a high potential for risk return.
Investors increasingly see Bitcoin as “Gold 2.0”
For institutional investors, gold is an important store of value and a safe commodity. It can be used as a hedge against inflation or as a hedge against possible declines in the market.
Investors see gold as the most reliable way to protect their investment portfolio from market corrections and general uncertainty. Therefore, safe-haven assets generally do not generate significant returns in the short to medium term.
Bitcoin has the potential to achieve these two goals because it has become a safe haven with huge growth potential.
The market value of gold is estimated to be approximately US$9 trillion. In contrast, Bitcoin is valued at $285 billion, which leaves a large gap between asset valuations.
In an interview with CNBC on November 9, Druckermiller pointed out that Bitcoin as a store of value trademark will only improve over time. He said:
“Bitcoin can be used as an asset class, as a store of value for West Coast millennials and new funds, and you know they get a lot from it. It has been 13 years old and it is absorbing more brand stability every day Sex.”
Huge risk and reward potential
Drucker Miller said in an interview that he “several times” owns Bitcoin’s gold, but the billionaire insists that if the price of gold rises, Bitcoin will also make huge profits and “may do Better”.
The investor stated that major cryptocurrencies are “thinner” and “more liquid” compared to gold. Therefore, even if Bitcoin accounts for a smaller proportion of the investment portfolio than gold, it has higher upside potential.
Half of Bitcoin will be rewarded via block every four years. Since the stable supply of cryptocurrencies is 21 million, the rate of mining BTC per day drops by 50% every half.
When the supply of Bitcoin decreases and demand increases, this creates long-term supply pressure and leads to price increases.
The price of Bitcoin is usually inversely proportional to the dollar index. Like gold, BTC tends to rise when the dollar falls.
In the long run, investors like Tudor Jones see Bitcoin as the ideal inflation game. In particular, after the Fed launched its 2% inflation target strategy, BTC has become more attractive for institutions to hedge against inflation.
Bitcoin does not have to be an investment. In the past, it has performed well as a portfolio asset, earning substantial profits for a balanced stock-based portfolio. Last month, Dan Tabiro, the co-founder of 10T Holdings, wrote:
“In the past five years, only 3% of Bitcoin positions will increase the performance of the 60/40 wallet from 6.8% to 10.2%.”
The performance of Bitcoin wallets. Source: Bloomberg, Yahoo Finance, Fidelity Digital Assets, Dan Tapiero
The combination of the four factors mentioned above makes Bitcoin an increasingly attractive portfolio asset for financial planners.
Real Vision Group CEO Raul Pal (Raul Pal) also pointed out that investors like Druckermiller who yearn for Bitcoin should not underestimate it when it may become a turning point. He said:
“The importance of the world’s largest and most respected money manager Stan Druckermiller (Stan Druckermiller), he just said that it has become a kind of long bitcoin, and cannot be exaggerated. He eliminated hedge funds or stopped investing in investment. Any obstacles.”