Is Bitcoin A Good Investment?

Is Bitcoin A Good Investment?

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May 2, 2020 by Super System
22
High Institutional Demand Expected After the COVID-19 Crisis In what the IMF is calling the worst recession since the Great Depression, the COVID-19 pandemic has led to an economic crisis on an unprecedented scale. Many investments have taken a giant hit and a lot of businesses are missing their earnings estimates. As investors scramble for
Bitcoin Investments After COVID-19 (1)

High Institutional Demand Expected After the COVID-19 Crisis

Bitcoin News

In what the IMF is calling the worst recession since the Great Depression, the COVID-19 pandemic has led to an economic crisis on an unprecedented scale. Many investments have taken a giant hit and a lot of businesses are missing their earnings estimates. As investors scramble for safeguarding their assets, the conversation has turned to cryptocurrency, such as Bitcoin, with people asking if it is in fact a good investment. 

Tetsuyuki Oishi, the CEO of Bitcoin Lab and a guest analyst for crypto matters at Fisco, a Japanese financial company, shared three reasons as to why he believes the institutional demand from investors will increase for cryptocurrencies after the COVID-19 pandemic. 

First, he pointed out that the stock market will be less attractive after the crisis because the demand for products produced by many companies will be down. This will result in a long-term decline in corporate profits. He notes that a “V-shaped” recovery of stock prices is very difficult to overcome. Investors can’t put everything in cash, but they will need to look elsewhere to inject some diversity into their investments outside of stocks.

Second, there is still very little correlation between cryptocurrencies and traditional investments. During the stock market plunge, most assets were sold, gold and bitcoin included, but they picked back up after, and as a result, made more room to incorporate assets that will have little to no correlation in society’s uncertain future.

Additionally, among such uncorrelated assets as cryptocurrency have not yet been incorporated into most investors’ portfolios. 

He also noted that the Q1 earnings in 2020 are showing capital inflows to the tune of $503.7 million into cryptocurrency investments, making it the largest scale ever. 88% of all investments were made by institutional investors. Oishi follows up by saying that the interest investors are showing now is a good sigh that the interest will continue after the crisis subsides. 

Financial Experts Recommend Bitcoin Added To Investment Portfolios

Economic experts were already recommending exposure to cryptocurrencies before the COVID-19 pandemic manifested.  For example, in a February report, JPMorgan stated that as the crypto market continues to grow, the trading participation in it by institutional investors has become significant. 

It is possible that over the next several years, bonds will lose their ability to hedge equity portfolios. Cryptocurrencies, therefore, should be added to portfolio lists as well because they have a unique ability to hedge a not yet witnessed environment, which entails a loss of confidence in domestic currency, coupled with a loss of faith in its payment systems.

Various finance experts are also recommending adding Bitcoin into investment portfolios. Some recommend that people invest their stimulus money into Bitcoin. Virgin Galactic chairman Chamath Palihapitiya has been pushing the narrative for a long time of allocating 1% of portfolios for Bitcoin investments. Mike Novogratz, chairman of Galaxy Digital also pointed out that with all the money printed by banks currently, it is the best time to invest in Bitcoin.

 

 


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