Bitcoin is a risk-asset rather than a safe haven. Similar to equities, bitcoin experienced a strong rebound this year as central banks unleashed an unprecedented amount of global liquidity. On the other hand, traditional safe haven assets, such as fixed income and cash, have done their job of producing low but stable returns, which is far from the characteristic of bitcoin.
Investors tend to diversify a portfolio of assets to minimize risk. In the risk bucket, they’ll allocate towards growth stocks, cyclicals and commodities. And in the defensive bucket, you’ll find sovereign debt, high-dividend stocks and cash.
Where does bitcoin fit in?
, such as and gold, provide investors with “non-traditional” (uncorrelated) returns. The typical alternative portfolio bucket holds assets for about 10 years, which includes illiquid investments in private equity, real estate and venture capital. However, bitcoin is tradable, which means that it is – making it a good candidate for long/short strategies typically used by hedge funds.
There’s a new wave of institutional investors in digital assets, and they’re not your typical investment advisers. Large funds that invest in alternatives are starting to view bitcoin as an attractive risk bet in their portfolios. We’re talking about an estimated $14 trillion market in alternative assets by 2023, according to a of institutional investors.
, a global asset management firm, recently announced it may seek indirect exposure to bitcoin. The firm’s Macro Opportunities fund may invest up to 10% of its net asset value in Grayscale Bitcoin Trust (GBTC) – about $497 million. (Grayscale is a sister company to CoinDesk.)