Small bitcoin stake makes sense regardless of cryptocurrency thesis, says Fidelity

Some investors might be trying too hard to understand bitcoin and missing an investing opportunity in the process, according to an executive from Fidelity Digital Assets. Matt Horne, head of digital asset strategies at the firm’s custody and trading arm for institutional investors, said investors and advisors are busy sharpening their cryptocurrency thesis when a small portfolio allocation is likely appropriate for them regardless of their thesis. “You could have multiple investment theses on bitcoin, and that’s okay,” Horne said Monday at the 2024 Vision conference, a crypto investing conference for advisors hosted by the Digital Assets Council of Financial Professionals in Austin, Texas. “Most investors are saving money, investing money with an advisor, to meet some longer-term goal [such as] retirement,” Horne added. “A non-zero position in something like bitcoin could make sense for a lot of clients given a long-term horizon [and] position sizing that’s appropriate for their risk.” Bitcoin ETFs hit the U.S. market almost six months ago. Advisors who needed regulated funds like bitcoin ETFs to direct their wealthy clients to invest in bitcoin represented a big case for the funds. So far, however, many have avoided jumping in for several reasons , ranging from high volatility to distrust and lack of understanding of the asset class to regulation and lack of a track record. “We spend a lot of time arguing over the disruptive technology [thesis] or venture investing or digital gold and I think yes to all those is fine,” he added. “What your thesis is is probably going to dictate position sizing and maybe where you source it from in a portfolio.” BTC.CM= YTD mountain Bitcoin (BTC) year-to-date Investors and wealth managers comfortable weighing in on bitcoin generally recommend a small allocation between 1% and 5% to add risk to a portfolio without subjecting it to too much of the cryptocurrency’s notorious volatility. “If it does (worst case) go to zero, the impact on the broader portfolio is minimal because of that condition size,” Horne said. “If it does what many of us expect it to, gain over time, then you want to make sure your clients have some of that exposure in there.” The Fidelity executive acknowledged that bitcoin’s short lifespan — it’s about 15 years old, and, even so, probably only worth tracking the years after 2015 — makes it practically “impossible” to model out. But that’s okay, too, he said. The key is for advisors and investors to seek education on this new arena of investing. “It’s tough because a lot of professional investors are able to model out every [other] asset class given the amount of data that’s at our fingertips now,” he said. “With digital assets, you don’t have the luxury … and I think that’s fine,” he added. “That’s why you just have to understand why you might want to own this, understand the potential of this technology, and then position accordingly.”