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Senior Bloomberg strategist: Gold and bond investment portfolios are useless without bitcoin!


A senior Bloomberg strategist has said that a portfolio of bitcoins, gold and bonds could well protect the value of traders’ assets against stock market fluctuations. He predicts that the price of bitcoin will reach $ 100,000 in the second half of this year.

to the Report Coin Telegraph Mike McGlone, senior strategist at Bloomberg Intelligence, believes that what can protect investment portfolios from the potential risk of stock market volatility is a combination of bitcoin, gold and government bonds. .

McGlown, who forecasts a price of $ 100,000 for Bitcoin, in a new report compared the performance of three safe-haven assets with the S & P500 stock index. He found that these three assets together, at least since the beginning of 2020, have performed better than the Wall Street index standard.

Senior Bloomberg strategist: Gold and bond investment portfolios are useless without bitcoin!
Comparison chart of S & P500 index performance and a basket of bitcoins, gold and bonds

McGellon for the Bitcoin, Gold and Bond Composite Portfolio Index based on data from the Grayscale Bitcoin Investment Fund and the ETFs SPDR Gold Shares and iShares 20+ T-B Has used. All three funds allow traders to invest in their target market physically without the need to purchase or maintain these assets.

Bitcoin has a better return than gold and bonds

McGellon says Bitcoin has done a great job of reducing investor risk. According to him, investment portfolios without bitcoins “look more empty every day than yesterday”, even if they consist of gold and bonds.

In his report, the Bloomberg strategist used the performance of bitcoin, gold and 10-year Treasury yields to counter the prospect of rising quantitative easing and growing government debt to GDP. Quantitative easing is a monetary policy in which the central bank buys securities with the aim of mobilizing financial markets.

The price of Bitcoin has risen by about 1,190 percent since March 2020, far better than the 25.93 percent increase in the value of gold.

Senior Bloomberg strategist: Gold and bond investment portfolios are useless without bitcoin!
Bitcoin Price Chart (1-Week Bitcoin / Dollar Market View)

Over the same period, 10-year bond yields rose from 0.33 percent to 1.326 percent.

Despite a reasonable increase in this measure, the yield on 10-year government bonds has fallen below the US core inflation rate (5.4%). This shows that those investors who use bonds to protect the value of their assets against stock market fluctuations, suffer losses by adjusting for inflation.

It should be noted that the core inflation rate only calculates changes in the value of goods and services and does not include fluctuations in food and fuel prices.

Senior Bloomberg strategist: Gold and bond investment portfolios are useless without bitcoin!
Chart of changes in axial inflation in the United States

As a result, lower bond yields open up new avenues for institutions to borrow at low interest rates to grow their business, which also helps the stock market thrive. In addition, secondary market investors are turning their capital into limited non-performing assets such as bitcoin and gold, and of course expect more profit.

Also read: What are Securities ?; Familiarity with different types of securities

Will bond yields continue to rise?

Bill Gross, who previously worked as a bond investor and turned Pimco into a $ 2 trillion capital management company, has said that bond yields can do nothing but increase.

The retired director of mutual funds has said that the yield on 10-year treasury bonds will increase to 2% in the next 12 months. Thus, bond prices will fall due to their inverse correlation with returns, leading to a 3% loss for investors who bought bonds during 2020 and 2021.

The Federal Reserve bought 60 percent of US government debt over the past year. The massive acquisition is part of the US Federal Reserve’s plan to boost the economy, which has pledged $ 120 billion a month in assets. However, the US Federal Reserve announced in August that it intends to slow down bond purchases by the end of this year, given the 2% inflation rate and economic growth it envisions.

“The US bond market is becoming a ‘nonsense investment,'” Gross said.

But how much will private markets be willing to absorb this 60% by mid-2022 and beyond? Medium-term and long-term bonds are becoming nonsensical and worthless investments.

An increase in interest rates could lead to capital outflows from expensive stock markets of American companies. At the same time, cash may flow into the bitcoin market in the form of a low-risk investment. Julian Emanuel, senior stock and derivatives market strategist at BTIG, made the point in a February interview with CNBC.

Emmanuel said:

This is the environment in which growing business will show its potential. With such an absolutely low level of interest rates, higher rates are likely to be beneficial for alternatives such as bitcoin.

According to McGellon, the influx of capital into the Bitcoin and other digital currencies, including Ethereum, means that traders are finding the best investment position.

“Digital currencies may show more potential volatility,” he said.

We expect $ 5,000 for Ethereum and $ 100,000 for Bitcoin.

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