Bitcoin to Absorb 1% of All Global Wealth
If you were lurking around Bitcoin X (Twitter) today you may have been surprised to see that the top story had nothing to do with the fact that the price of bitcoin woke up from its slumber, rising ~3.5% to $44,500.
The top story in fact had to do with the fact that Fidelity Assets Canada updated their All-In-One ETF products to include a minor exposure to the
Fidelity Advantage Bitcoin ETF® (FBTC).
Fidelity All-in-One ETFs captured on 2024–02–07.
Fidelity Digital Assets has applied a 1% Bitcoin exposure to their Conservative Fund (40% Equities, 60% Bonds), a 2% exposure to their Balanced Portfolio (60/40), and a maximum of a 3% exposure to their Growth (80/20) and Equity Portfolios (100/0).
To me, the amazing part of this story is not the maximum 3% Bitcoin exposure, the incredible part is the exposure in the Conservative Portfolio…
People who invest in Conservative Portfolio are the furthest ‘in’ on the risk curve, those who are either very close to retirement, uneducated about investing, or looking to achieve a safe, and dependable return which won’t go down. These people are being directed, by their asset manager, to assign 1% of their portfolio to Bitcoin. Incredible.
Bitcoin’s Performance
It's not hard to see why Asset Managers will be guiding their clients towards Bitcoin. Despite the infamous volatility which can scare away many conservative investors, Bitcoin has managed to eclipse other asset classes over the past decade. In fact, it has been the best-performing asset class for eight out of the past eleven years.
Now, time to take a closer look at Bitcoin’s historical returns for various holding periods (as of December 31, 2023):
1 year: 156.62% return
3 years: 50.00% return
5 years: 999.77% return
7 years: 5,147.10% return
10 years: 6,172.12% return
These figures highlight the unique growth potential that bitcoin has exhibited over time, which has made it an attractive option for investors seeking high returns, and asset managers looking to outperform the benchmark.
Outperforming the Benchmark
A benchmark is a measure used to analyze the performance of a portfolio compared to the performance of other market segments.
Using a standard 60% Equities and 40% Bond portfolio as a benchmark, it becomes clear to see that allocating a small sliver of your portfolio to Bitcoin significantly increases the Cumulative Returns over the past 12 years.
Small Bitcoin Exposure Enhances Results (Vaneck, 2024)
The 12-year cumulative return for the 60/40 benchmark was 176%. Adding simply a half percent allocation to Bitcoin over the same timespan increases the return of the portfolio to 198%. If you increase that allocation to 3%, the return jumps to 331% — doubling the return of the original benchmark…
When the math behind the returns is so crystal clear, it becomes obvious that asset managers are becoming incentivized to include Bitcoin in their clients’ portfolios.
Despite an Asset Manager’s personal feelings or ideologies towards Bitcoin, excluding this top-performing asset will cause their funds to lag behind the new benchmark, which will force clients to turn to their competitors for greater returns.
It is estimated that in 2022 the amount of wealth stored in all ETFs globally was roughly 10 Trillion Dollars.
How high do you think the price could go if Bitcoin could capture as little as 1% of these assets? As we all know, 1% turns into 10% very quickly!
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Speaking of all this ETF talk, check out my previous article breaking down Five Reasons to Buy the Bitcoin ETF and NOT Bitcoin