Through their strong dependence on statistics, investors may be an emotional bunch — after all, they are subject to the same prejudices as anyone else. Here is the most recent proof for that claim: Bitcoin has recently closed around $60,000.
Mastercard and BNY Mellon, both financial technology corporations, have launched new Bitcoin projects, assisting it to surpass this significant milestone. Their actions follow Tesla’s iconoclastic CEO Elon Musk’s statement that his firm has acquired $1.5 billion in Bitcoin and will begin taking payments in the cryptocurrency.
Despite Bitcoin’s recent growth, you should proceed cautiously. Despite the fact that the flagship cryptocurrency seems to be maturing, it remains highly unpredictable in both directions. For ordinary investors, this means treading carefully in this speculative asset class until you have your basics secured, such as an emergency fund and a simple retirement portfolio.
Big Companies Are Buying Bitcoin
BNY Mellon, which dates back to the 18th century, is the most recent major name to enter the world of Bitcoin. The financial services behemoth intends to assist its asset-management customers in using Bitcoin, effectively treating it like any other security. Meanwhile, Mastercard announced that it would accept Bitcoin purchases on its network in order to provide companies and consumers with “extra flexibility” in how they purchase goods.
It’s worth noting that Elon Musk’s obsession with digital currencies is nothing recent, and it fits well with his penchant for unorthodox investments and concepts.
Tesla said it added $1.5 billion in Bitcoin as part of a larger policy to earn more on its cash that it doesn’t need to keep the company going.
Institutional Investors See Bitcoin as an Inflation Hedge
As Covid-19 spread to Europe and then the United States, starting in late February, governments began imposing lockdowns to limit the spread of the virus. Lockdowns suppressed economic growth, sparking a global recession, and central banks stepped in to support national economies. Paul Tudor Jones and other hedge fund titans started purchasing Bitcoin in May in expectation of increasing inflation.
“I favored Bitcoin because it was on the menu of inflation trades, including gold, TIPS breakevens, silver, and being long yield curve, and I came to the realization that Bitcoin was going to be the greatest inflation trade,” he says.
PayPal Makes Bitcoin Easier to Own and Spend
In October 2020, PayPal revealed that customers will be able to acquire, carry, and sell a variety of cryptocurrencies, including Bitcoin, as well as make transactions using Bitcoin at over 26 million companies.
The Wise Origin Bitcoin Index Fund I, introduced by Fidelity in August 2020, is a passively run Bitcoin fund for approved investors. Fidelity, one of the few traditional Wall Street companies that has completely embraced Bitcoin, has established a new unit called Fidelity Digital Assets to handle this fund and related vehicles.
Normal investors do not have the privilege of enduring crazy market volatility and years of negative returns in the expectation that an esoteric decentralized financial commodity can overtake the commanding heights of finance and dethrone gold as the only safe-haven asset. You need a more stable investment strategy, such as a well-diversified portfolio of low-cost index funds that has proven to allow retirement.
If you intend to satisfy your Bitcoin craving, make sure to do so with a portion of your taxable savings in your brokerage account. The normal allocation for gold has been a limit of 10% of your overall portfolio. If Bitcoin becomes the new money, the upper limit always makes a lot of sense.