Bitcoin made history these past few months. It broke its historical record, flirted with a 10x ROI in one year, its realized price also reached ATH, and it became the best performing asset of the decade.
But is it a good investment overall? It all depends on the crystal you look at it with. For example, Gerald Moser, chief market strategist at Barclays Private Bank, thinks it’s not.
Don’t Invest in Bitcoin
For Moser, the price fluctuations associated with Bitcoin and other cryptocurrencies are so extreme that investing in them is not a good idea. The investor told Financial News:
While it is nigh on impossible to forecast an expected return for bitcoin, its volatility makes the asset almost ‘uninvestable’ from a portfolio perspective
Moser’s statements show that the typical Walls Street investor is not comfortable with very volatile assets, regardless of how lucrative it promises to be.
Moser explained that he would place Bitcoin in a high-risk category, alongside equities or oil investments. But even with this consideration, “many would probably throw the cryptocurrency out of any portfolio in a typical mean-variance optimisation.”
Moser not only considers Bitcoin to be a bad investment but also a poor risk diversifier. He explained that weekly return correlations since 2016 show that bitcoin is not correlated with any asset. In fact, his calculations show that Bitcoin underperformed equities over the last three corrections since 2015.
But if Bitcoin is so bad, what explains the massive wave of institutional investment that has catapulted Bitcoin’s price to new heights?
For Mose, the answer is simple: It’s a kind of “meh” news taken to the extreme. Institutional investments are not as influential as many people think:
The performance of the cryptocurrency has been mostly driven by retail investors joining a seemingly unsustainable rally rather than institutional money investing on a long-term basis
Adam Grimsley, founder of the first crypto fund in the UK, also shares this opinion. He believes institutions represent a minimal market share and will hardly be leaders because Bitcoin fails when studied within the traditional investment categories.
The Other Side of the (Bit)coin
However, not everyone shares this pessimistic view. MicroStrategy is one of the companies that decided to put a lot of skin in the game, acquiring more than 70K Bitcoin in 2020.
Its CEO Michael Saylor has become one of Bitcoin’s leading evangelists in the business world, offering everything from free courses on understanding Bitcoin to outlandish statements like saying that BTC could have been designed by God.
— Michael Saylor (@michael_saylor) January 20, 2021
Other major international institutions and banks have also praised Bitcoin, claiming that it’s a much more mature asset with room to grow. For example, PayPal’s CEO said during the Web Summit, that he was “very bullish on digital currencies of all kinds”.
Also other mainstream banks from all around the world are starting to offer crypto-related services, changing their views, prasing bitcoin, and using the blockchain for its internal operations.
In the end, only time will tell who is right. Until then, Bitcoin will keep doing what it does best: Make traders wonder what will be its next big move.