, 3 years ago

Why institutional investors increasingly rely on Bitcoin

Bitcoin has recently gained more and more prominent support and more and more financial icons are turning to BTC. But what is the reason for this sudden change of heart? For years, bankers and star investors preached that Bitcoin would involve too much of a risk. Apparently, their opinion has turned 180 degrees. Because now Bitcoin is discussed ever more as safe haven asset, which shouldn’t be missing in each portfolio.

Inflation or deflation -Fear of chaos

Many market observers are very concerned that the current monetary policy could lead to chaos on the markets. After all, the money supply will continue to increase. While this effect played a latent role in the background for a long time, the economic crisis initiated by Corona led to an acceleration.

As a result, many experts are expecting inflation, which could lead to a massive devaluation of the US dollar, but also of the euro. Deflation is discussed less often, but also regularly. The astonishing thing is that many experts conclude that Bitcoin could be the right answer in both scenarios.

Bitcoin shows low correlation

Although there is huge difference between deflation and inflation, supporters of both scenarios have the same reason for identifying Bitcoin as a potential winner in a possible crisis.

This is because BTC simply has a very low correlation with other markets. This means that the price of Bitcoin often develops independently of political or economic events. Other assets, such as certain stocks or commodities, on the other hand, can react massively if the market conditions change.

Although the Bitcoin price fluctuates relatively strongly -one speaks here of high volatility -it does not react to events that can harm other investments in a portfolio.

From Novogratz to Druckenmiller

For exactly this reason there are more and more star investors, billionaires and even bankers, who speak out publicly for Bitcoin. In this context, it is worth remembering that they hold Bitcoin as a small reserve.

Therefore, the allocation in their portfolio should not exceed 1% to 3%. It is therefore a bet that Bitcoin is the safe haven that may ensure the preservation of value of their assets in a crisis situation. Other Bitcoin bulls, such as some Michael Saylor, assume that Bitcoin is even better than any cash reserve and invest much more massive amounts in BTC.

Overall, all institutional investors share the same paradigm. Namely that Bitcoin is the best store of value that can be found at present.

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