August 17, 2020
Bitcoin, which is up 60% year to date against the USD, but it is still a long way off in the adoption game with loads of upward potential, as we see a number of very large traditional hedge funds are active in the crypto world.
Bitcoin again was on the verge of hitting 12,000 USD yesterday but failed to achieve that mark and is currently trading around 11,870 USD.
While the digital asset has been battling to arrive at this level for the past two weeks, bitcoin’s gains since its lows in March have helped crypto-focused hedge funds to ride the volatile markets better than their counterparts who have focused more on bonds and stocks.
Over the last seven months, crypto fund managers returned over 50% compared to low single-digit gains produced across traditional assets. A year ago, crypto hedge funds increased by only 16%, however, it still outperformed mainstream hedge funds, which only saw a 9% increase.
This surge has seen bitcoin increase by 60% year to date against the USD and up 215% since the March collapse.
At present, stocks and gold are enjoying a rally due to government policies. This is the reason why Warren Buffett has moved to gold, he has reduced his bank holdings and sold off his shares in Goldman with only Barrick Gold being added in Q2.
Gabor Gurbacs, digital asset expert at VanEck said about Warren Buffet “he would never invest in gold. He did invest in gold miners because it made sense. he also said that he would never invest in Bitcoin. I am waiting for the day when he changes his mind on Bitcoin,”.
But according to Wall Street fund manager Michael Novogratz, bitcoin is a better bet than gold.
Novogratz, who has around a quarter of his wealth in Bitcoin, says the digital asset is “harder to buy” than the traditional safe-haven and, as such, a more worthy investment.
He went on to say “It’s only got a 20 billion USD market cap, while gold is over 10 trillion USD, so it’s got a long way to go to catch up to gold in terms of just adoption.”
While Novogratz doesn’t advise that beginners put in more than 1-2% of their capital into Bitcoin, London-based digital asset management firm CoinShare are advising investors to use 4% of their portfolio to the cryptocurrency since it is “in its growth phase (and) behaves like a tech stock.”
Increased Interest in Bitcoin.
The possibility of solid returns over the long-term keeps drawing in investors, as suggested by Michael Sonnenshein, managing director at Grayscale Investments, the 5.7 billion USD AUM crypto fund, which pulled in 900 million USD of inflows in 2020, three times more than the whole of 2019.
Mr. Sonnenshein said that “Overwhelmingly, the inflows are coming from major hedge funds and conversations are being driven by zero interest rates, which is eroding the value of fiat currencies.”
The present environment of collapsing interest rates is additionally supporting Bitcoin with high stock price keeping pressure on dividend yields.
Max Boonen, co-founder of crypto trading company B2C2 said: “There is no yield on crypto, but look at it this way: the floor in bitcoin is zero whereas in many traditional markets we now have negative rates and yields.”
The Bitcoin market itself has been developing; not just the instability fell lower than stock markets this year, but price disparities on various exchanges that created opportunities have almost disappeared.
Fundamental Analyst for Global Markets
James has over 20 years of experience trading FX, cryptocurrencies and investments products for a range of investment banks and brokers
He spent the last 10 years analyzing and writing about foreign exchange, crypto-currencies and the global financial markets
He has also spoken at a range of conferences around the globe on various financial topics.