In a recent report titled “The Bitcoin Investing Thesis”, Fidelity Digital Assets explained how portfolio managers can increase revenue by transferring a small portion of their ownership in Bitcoin (BTC). The report also indicates that increased institutional interest in the near future could increase Bitcoin’s market value by hundreds of billions of dollars.
To support this challenge, Fidelity modeled portfolios that began with a standard 60/40 split between stocks and bonds. They diversified them using 1 to 3 percent of bitcoins. In every scenario Fidelity considers, wallets with higher Bitcoin distributions have outperformed their less diversified counterparts.
Related news: Fidelity says “there is almost no correlation between Bitcoin and the returns on other assets”
Assets that are negatively or closely related to the rest of the market provide additional benefits to portfolio managers. It allows you to reduce volatility without sacrificing profits. The simulated portfolios, which still use bitcoin, took advantage of the asset’s lower correlation to traditional assets. However, the report acknowledges that the increasing adoption of Bitcoin in the financial industry could lead to a stronger correlation in the future, thus reducing the benefits of diversification.
Related news: Fidelity says retail investors will undoubtedly switch to Bitcoin
The Fidelity Report also assesses the potential for reallocation of investments from alternative investments and fixed income into Bitcoin. The first market is valued at $ 13.4 trillion, and if Bitcoin captures 5% of that market, the market value will increase by $ 670 billion. If it acquired 10%, the market value would increase by $ 1.3 trillion. The bond market is valued at approximately $ 50.3 trillion. If Bitcoin captured 1% of this market, it would be another $ 500 billion.
The report argues that falling bond yields could push asset managers toward alternative assets. If the more optimistic forecasts come true, Bitcoin’s capitalization could rise to $ 2 trillion.