A new report from U.S. asset manager Fidelity is remarkably optimistic about Bitcoin (BTC) and the rest of the crypto space.
In the future, the interest of institutional investors should increase Bitcoin’s market capitalization by hundreds of billions of dollars. Is Bitcoin massively undervalued?
Following the recent announcement of investments in Bitcoin Loophole platform by MicroStrategy and Square, one of the world’s largest asset managers is now taking the floor.
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Fidelity Digital Assets, published a report entitled „Bitcoin Investment Thesi“. In this report, Fidelity explains how portfolio managers increase their returns by holding Bitcoin.
Using a variety of fundamental data, Fidelity analyses the Bitcoin network. In addition, several sample portfolios illustrate the performance advantages of a diversified portfolio containing BTC.
According to Fidelity, generational change and new forms of media consumption in particular are seen as driving forces for the future growth of digital assets:
Financial media and the way people consume investment information are changing. This is happening against the background of a massive generational transfer of assets. Bitcoin has the potential to be the first asset to capitalize on these developments.
Fidelity compares crypto market with investments in emerging markets in the late 1980s
The acceptance of Bitcion and other crypto currencies can be compared to the acceptance of emerging market equities in the late 1980s.
Similar to crypto space today, there were concerns about volatility and liquidity at that time. Nevertheless, over time, many investors recognized the potential of emerging markets and invested early.
Today, investments in emerging market equities account for 11 percent of the global stock market – a tremendous growth. Can the Bitcoin share price also benefit from institutional investments in the coming years?
Cathie Wood, Head of Department at Fidelity, believes it is possible that Bitcoin will follow a similar path to the emerging markets.
In the USA, myopia prevailed. Investments in emerging markets were not recommended. Bitcoin today can therefore be compared to the situation at that time.
What does this mean for the future of BTC?
The participation of traditional institutions in Bitcoin is at the highest level ever.
In addition, Krypto YouTuber Quinten Francois commented on the trend and illustrated the development in an interesting graphic by Coin98 Analytics.
Not only have Square and MicroStrategy invested in BTC in 2020; there are now more than ten public companies holding a total of over $7 billion worth of BTC. Furthermore, Grayscale alone holds more than 2.6 percent of the total Bitcoin circulation.
Fidelity believes that steadily declining bond yields and the expansive monetary policies of central banks are driving more asset managers worldwide to alternative investments such as Bitcoin.
In a most optimistic forecast of the Fidelity report, the market capitalization of Bitcoin could thus rise up to two trillion dollars.
In addition, assets such as crypto-currencies that are negatively correlated or have low correlations with the rest of the global market offer portfolio managers enormous advantages in managing assets.