Outside Source
CoinShares, a prominent asset management firm, has identified Bitcoin as a key strategic asset for managing exposure in investment portfolios.
The latest recommendation comes amidst a notable surge in inflows into digital asset investment products, which have reached a staggering $1.7 billion over the last nine weeks, marking the largest increase since late 2021.
Bitcoin (BTC), the leading cryptocurrency, has been at the forefront of this influx, attracting over $1 billion in the past month alone, culminating in a total of $1.6 billion year-to-date. Ethereum (ETH) also witnessed a substantial inflow of $126 million, indicating a notable shift in investor sentiment.
Despite Bitcoin’s reputation for delivering substantial returns, it is often viewed as a high-risk addition to traditional stock and bond portfolios due to its volatility.
However, CoinShares’ latest report presents a different perspective, suggesting that even minimal allocations of Bitcoin can have a disproportionately positive effect on the risk-adjusted returns and diversification of a balanced investment portfolio.
The research further highlights Bitcoin’s unique position as an alternative investment, primarily due to its low correlation with traditional assets. This characteristic enables it to act as a hedge against economic cycles.
CoinShares also notes that regular rebalancing of Bitcoin allocations can effectively reduce volatility and enhance overall portfolio performance.
The value of Bitcoin recently experienced a decline of approximately 4% following a $4.3 billion settlement between Binance and the US Justice Department. However, it swiftly recovered, climbing to a value of $44,000.
CoinShares attributes this resilience to several factors, including the industry’s elimination of bad actors, signals from the Federal Reserve indicating a potential halt in interest rate hikes, and the anticipated approval of a spot Bitcoin ETF.
In addition to Bitcoin’s performance, the asset manager has observed a rare widening of contango in the futures market, a phenomenon not seen since 2018. This situation is interpreted as a strong, bullish indicator, with futures premiums reaching significant levels.
Ethereum, on the other hand, has been buoyed by consistent positive funding rates, high trading volumes and leverage, and a balanced long/short ratio of 0.97. The gradual increase in gas prices is also exerting upward pressure on Ethereum’s price, accentuating its deflationary nature and amplifying the impact of buying volume.
This article first appeared at crypto.news
