Reports & Analysis

4 Charts showing that Bitcoin is a risky asset


Damanick Dantes is a renowned trader specializing in commodities, stocks and digital currencies. Dantes is a former member of the International Asset Allocation and Budgeting Research Team at Fidelity Investments. he in an essay Which has recently been published on the Coin Desk website, seeks to demonstrate the potential risk of bitcoin as an asset. You can read the following text from Dante.

Bitcoin is not a safe haven, but a risky asset.

Risk-asset is not just a negative asset, but an asset that investors invest in to make big profits.

This year, as central banks printed banknotes and injected unprecedented liquidity into global markets, Bitcoin, like stocks, experienced strong growth again after falling due to the outbreak of the Corona virus. On the other hand, traditional assets, such as fixed income and cash, which are used as a safe haven, offer low but steady returns to individuals that are very different from the features of Bitcoin.

Investors often tend to diversify their portfolio to minimize risk. They take part of their risk-taking on emerging stocks, cyclical stocks and commodities, and less risky assets in their portfolio include government loans, high-yield stocks and cash.

Where is Bitcoin in the portfolio?

Alternative assets are any assets, except stocks, bonds, and cash. These assets, like bitcoin and gold, offer investors “non-traditional” (non-corporate) profits and returns. Alternative stock portfolio assets are usually held for approximately 10 years. These assets include non-cash investments in private equity, real estate and venture capital investments. However, bitcoin is tradable, meaning it is more cash-strapped and a good option for the long and short strategies commonly used in hedge funds.

Now, a new wave of institutional investors has entered the world of digital assets and adopted traditional methods of investing. Large investment funds investing in alternative assets place bitcoin in their portfolio as a risky but attractive investment. According to a survey by institutional investors Preqin, the market value of alternative assets will reach $ 14 trillion by 2023.

Guggenheim, the global asset management company, recently announced that it may be seeking indirect investment in bitcoin. The company ‘s Macro Opportunities Fund is likely to invest up to 10% of its net worth, equivalent to $ 497 million, in the Bitcoin Grade Fund (GBTC).

In this article, we look at four charts that show the use of bitcoin as an alternative, high-risk asset.

Bitcoin has grown at the same time as the Federal Reserve’s balance sheet. The Federal Reserve’s balance sheet, after a two-year period that has not changed much, has returned with all its might this year to resume its plan to buy assets. As a result, the Federal Reserve, considered by many to be the lifelong savior of the US economy, has enhanced the attractiveness of Bitcoin as a high-risk alternative asset.

Bitcoin;  A high-risk alternative asset
US Federal Reserve assets and weekly bitcoin prices

The number of bitcoin units available to investors is increasing. Bitcoins that are stored in wallets for long periods of time are less likely to be cashed in and sold. This maintenance trend means that with the maturity of Bitcoin, the number of investors in this asset is rapidly overtaking the number of traders.

Bitcoin;  A high-risk alternative asset
Bitcoin held and liquidity level

Large bitcoin owners still control a large part of this market. Unlike traditional assets, owning a large number of bitcoins means that a large bitcoin investor can have a huge impact on price movements, and this is where alternative stock portfolio strategies come into play.

Bitcoin;  A high-risk alternative asset
Percentage of addresses that hold 95% of the available bitcoins

Bitcoin remains in its long-term uptrend. Systematic stock portfolios manage market fluctuations through appropriate positioning based on price trends. One of these methods is to calculate the market value of Bitcoin relative to its realized value (MVRV); This ratio indicates that Bitcoin is currently trading above its “real value” and, of course, below its previous maximum prices.

These trend-setting systems are often used in managed futures markets with $ 303.6 billion in assets under their control, a significant amount that can be sent to the digital asset market.

Bitcoin;  A high-risk alternative asset
The daily value of the Bitcoin market relative to its realized (real) value and the price of Bitcoin

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