“Should institutional investors buy Bitcoin?” Fidelity Digital Assets published a report on Bitcoin today. answered the question. As a result of the report, the Fidelity team concluded that Bitcoin could grow over time to “become an independent asset class” and be a good investment alternative.
Although many investors prefer to invest in traditional markets, the trend towards alternative investments is increasing. The “alternative investment” category includes different activities such as angel investment and farming. 12% of the total investment made worldwide in 2018 was in alternative investment vehicles, providing it with a market of 13.4 trillion dollars. According to CAIA members, this rate could rise to 25% by 2025.
The Fidelity Digital Assets team published a report today to evaluate whether Bitcoin could be seen as an alternative investment tool.
What are the advantages and disadvantages of Bitcoin?
In order for an asset to be considered as an alternative investment, it should not have a strong correlation with traditional markets. Bitcoin, which emerged in 2009, seems to meet this definition as it has been independent of traditional markets for a long time. According to Fidelity’s research, the reason for the weak correlation with Bitcoin in traditional markets is:
- Bitcoin largely appeals to individual investors,
- Variability of gain and risk factors,
- The perception in the market changes much faster,
- It may be that the investors in the two markets are independent from each other.
Although Bitcoin has moved independently from traditional markets in the long run, this has started to change in recent months. Bitcoin, which started to move with the S&P 500 and the gold markets, attracted the attention of more and more institutional investors. The Fidelity team also stated that if the number of institutional investors in the Bitcoin market increases, the correlation between BTC and traditional markets can be strengthened. However, this does not mean that Bitcoin cannot be an alternative investment.
Bitcoin can be a good option anyway
Although the correlation between Bitcoin and traditional markets gets stronger over time, there are some fundamental differences between these two markets. These differences manifest themselves in the areas of liquidity, accessibility and low cost.
Investors can trade with Bitcoin 24/7 and do not have a serious problem with liquidity, thanks to a $ 21.3 billion trading volume. Beyond that, Bitcoin is more accessible than other alternative investment tools. Start-ups, farms, artworks etc. Although it requires a significant amount of capital to invest, Bitcoin is suitable for any investor’s wallet. People can also make transactions at low costs when they buy Bitcoins, open a term Bitcoin contract when necessary and turn to different alternatives.
All of these can enable Bitcoin to be seen as an independent and alternative investment tool. If a share of 5 percent from this market (13.4 trillion dollars) is taken, there will be an increase of 670 billion dollars in the market value of Bitcoin. Considering that the instantaneous value is 210 billion dollars, this gives Bitcoin a unit price of almost 50 thousand dollars.