In today’s world, Bitcoin has emerged as the best way to store value. Everyone wants to own some kind of digital asset in this digital age. It’s worth investigating how much of this is reflected in investor behavior.
It is well known that the 60/40 allocation has been one of the most widely used strategies in portfolio construction. Is Bitcoin about to change everything? Or will investors remain skeptical of cryptocurrency indefinitely?
Bitcoin can be found almost anywhere.
It is worth noting that the crypto-market has successfully attracted mainstream investors, including former skeptics, over time. Indeed, Bitcoin has emerged as one of the most sought-after assets among investors. As a result of Bitcoin’s mainstreaming, the age-old debate over the 60-40 portfolio strategy is changing.
The 60/40 portfolio is a traditional investment structure in which total investments are split 60/40 between stocks and bonds. This helps to keep risks to a bare minimum.
Bitcoin, on the other hand, now offers excellent returns. As a result, it is suggested that a 5% allocation be made to it as well. Another reason is that BTC outperforms bonds (BND) and stocks (VOO).
Furthermore, Bitcoin appears to be outperforming bonds and stocks in terms of growth and returns.
However, there is some degree of speculation involved here. And that must be addressed. What would happen, for example, if people abandoned the stock market? Will the listing of an ETF tomorrow divert investors’ attention away from major and minor stocks?
Is there no reason to be concerned?
Marc Lichtenfeld, Chief Income Strategist of The Oxford Club, provided some insight into the effects of such portfolio diversification in an exclusive interview with us. Bitcoin, in his opinion, will not pose a threat to the stock market.
Lichtenfeld believes the crypto-market does not pose a threat to the stock market because it is still not regarded as a financial instrument. It is thought to be more useful to cybercriminals, which is why people are hesitant to invest in it.
According to him, if a Bitcoin ETF is listed in the future, it will not harm the other small companies that are listed on exchanges. This is because, in comparison, these companies will be more trustworthy.
Furthermore, the strategist stated that participation is an important factor in this case. As a result, the crypto-market has had no impact on the stock market because participation in the latter remains low. People, for example, are hesitant to open an account on Coinbase due to the complexity of the process, as well as their lack of understanding and fear of it being used by criminals.
Nonetheless, a slew of corporations are cashing in on the crypto-fever by either purchasing Bitcoin or announcing plans to do so. According to the analyst, this could also entice more investors to enter the market.
Including Bitcoin in one’s portfolio does result in higher returns. Furthermore, as the strategist pointed out, it is unlikely to harm the rest of the portfolio’s bonds and stocks.