At certain points of analysis, Bitcoin (BTC) can be a disappointment as an investment. However, this does not mean that it is bad to maintain in the long term. A new report from Sungarden Investments makes that point.
“S&P 500 and Bitcoin: After four years of mediocrity with the latter, I have both,” the title emphasizes. The digital currency reached a record price of $126,000 (USD) three months ago, almost double the previous cycle’s peak ($69,000 in 2021). But already canceled some of the profits.
It currently trades around $90,000, just 30% above the high of the bull cycle four years ago. This means an annualized return of about 8% since then.
Still, Sungarden Investments emphasizes that: Holding U.S. Treasury Bills is much riskierwhen comparing the same period. They earned half of the return despite starting with interest rates close to 0% at the end of 2021.
However, the situation changes when we analyze Bitcoin over a longer period of time. Those who have held for more than 10 years have recorded returns of more than 15,000%. But “if you had jumped on the bandwagon four years ago, your performance would have been worse than most stock markets,” the analytics firm says.
lastly, Each investor’s experience varies greatly Depending on when you entered the asset. This can be seen, for example, by comparing BTC’s performance since its launch as a spot exchange-traded fund (ETF) in the US with SPY, the flagship product of this type after the S&P 500.
If you were one of the many who skyrocketed in early 2024 when IBIT and 11 other spot Bitcoin ETFs made buying crypto easier, you’re up 87%, comfortably outpacing SPY over the same period. Now, if you look at the chart below, just three months ago, IBIT outperformed SPY by 168% to 44%. As a result, margins rapidly declined from 124% to less than 40%.
Sungarden Investments, an investment company.
Diversify between Bitcoin and other assets
For signing, the key looks like this: Combine asset classes that often have low correlationespecially when the market crashes. “Given that IBIT still continues to be treated as a nascent asset, now is still a good time to consider it,” he believes. Let me be clear that iShares Bitcoin Trust (IBIT) is a Bitcoin ETF issued and managed by BlackRock.
Sungarden Investments’ goal is to maintain 10 ETFs. “The majority will remain on staff for a long time, but some will be replaced, unless it seems unattractive from a short-term profitability perspective. Once the diversification benefits are no longer available, whether short-term or long-term.”
The strategy there is to assign a lower investment percentage to the most volatile assets, and a slightly higher investment percentage to assets that are less volatile or have great potential in terms of their chart.
In his opinion, the IBIT technical chart does not seem solid. look at it exposed to high risk combinationsas the utmost enthusiasm for cryptocurrencies. For this reason, we allocate 2% of our 10-stock ETF portfolio to investments for diversification. Similarly, we maintain SPY, an ETF that replicates the movements of the S&P 500 index.
This tactic is similar to that of individuals and investment companies who invest in BTC or one of its ETFs as part of a diversified portfolio. Some believe that a higher allocation to digital currencies would be desirable in this area. Bank of America recommends up to 4%, and Edelman advisors recommend up to 40%.
Bitcoin as a major reserve asset
On the other hand, from another, more optimistic view of the market, There are companies that are devoting their business to BTC treasuryas well as TwentyOne Capital. This consists of accumulating this asset as the main part of reserves.
Typically, Bitcoin treasury companies leverage themselves to purchase the currency, as is the case with Strategy, the company with the most BTC in the world, which issues shares to accumulate investments.
This comes amid growing institutional adoption of Bitcoin, as evidenced by the clustering of top public companies that hold the most Bitcoin. At the same time, the government is increasingly acquiring BTC as a strategic asset through criminal seizures.
In this context, Long-term bullish expectations remaindriven by finite supply and increasing market interest. Still, as reported by CriptoNoticias, current modest demand leaves us cautious about short- and medium-term performance.
