The Bitcoin price, still near record highs, remains notoriously volatile. Should ASX investors embrace it as a defensive asset?
The post Should ASX investors own Bitcoin (CRYPTO:BTC) as a defensive investment? appeared first on The Motley Fool Australia. –
The Bitcoin (CRYPTO: BTC) price stands at US$55,900 (AU$72,600) at the time of writing. That’s up 3.3% over the past 24 hours. However, the Bitcoin price is still down 8.7% from its all-time highs of just over US$61,520, which it reached this past Sunday.
If you’re familiar with cryptocurrencies at all, you’ll know they have a notorious history of volatility. According to data from CoinDesk, just last year you could have bought one Bitcoin for US$5,700. If you’d held onto it, you’d be sitting on a gain of 880% today.
But price swings run in the other direction too
Sticking to just the past 30 days, Bitcoin was trading for US$57,960 on 22 February. By 1 March, the price had tumbled to US$43,500. In other words, the Bitcoin price tanked 25% in only one week.
So why are more institutional investors turning to Bitcoin as a defensive asset?
Why more institutional investors are banking on Bitcoin
Governments in developed nations are spending trillions of dollars in fiscal stimulus measures to counter the economic impacts of the pandemic. And central banks are ramping up their quantitative easing (QE) programs and holding interest rates near zero. As such, many investors fear that rising inflation may be just around the corner. Indeed, US Government 10-year Treasury notes are yielding just over 1.6% today, the highest since before COVID struck.
Now, according to a survey conducted by JPMorgan, an increasing number of professional investors are turning to Bitcoin over more traditional assets like gold and inflation-linked bonds to hedge against inflation.
As reported by The Australian Financial Review on Monday:
According to a JPMorgan institutional investor survey of 174 asset managers, owners, and hedge funds responsible for more than $US15 trillion in assets, 29 per cent responded they’re positive on digital assets in that they may replace fiat money in the future. Forty-four per cent were neutral and 14 per cent negative.
Of the respondents, 26% cited the “debasement of fiat currencies as the most compelling reason to invest in Bitcoin, versus 13% of investment managers”. Increasing market dept, with more financial institutions turning to cryptocurrencies like Bitcoin was cited by another 27%.
The JPMorgan survey also revealed that 54% of the professionals who are invested in digital tokens “have an allocation less than 1 per cent, with 32 per cent having an allocation between 1 to 5 per cent; 79 per cent of all professionals declared the allocations unhedged.”
So as an ASX investor, should you invest in Bitcoin as a defensive asset against the spectre of rising inflation?
That, dear investor, is a decision you’ll need to make for yourself.
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.