Bitcoin has been on a massive bull run as of late. The digital currency has been doing so well that London-based asset firm Coin Shares is telling all its customers to move approximately four percent of their money into bitcoin and crypto.
Coin Shares: 4% Is Best
At the time of writing, bitcoin is trading for just over $11,500, which is about $400 lower than where it stood on Monday, though it’s still $200 higher than where it stood 24 hours ago. Bitcoin experienced a nasty $600 fall yesterday that caused many analysts to worry about whether the currency would continue with its present track. The fact that it is already working to revamp itself and jump back to its previous spot is suggestive that the currency’s strength hasn’t worn out yet.
In a recently published report, Coin Shares explains that bitcoin is acting somewhat like a “tech stock.” As we all know, major tech companies have experienced huge surges in the prices of their shares this year, with Amazon incurring a major rally during the halfway point. Thus far, however, bitcoin has outdone the likes of Google, Amazon and many others, and is presently up approximately 60 percent from where it stood at the beginning of the year.
The report explains:
Bitcoin, in its growth phase, behaves like a tech stock. Having started its life at a price of zero, it’s no surprise that bitcoin’s investment performance, like that of a successful startup, has been stellar. As a disruptive technology, bitcoin’s risk profile is rather similar with that of a technology stock. If it reaches its potential, the value could be immense, but at the same time, there is a chance it fails entirely, leaving the value of bitcoins close to zero.
Much like the tech stocks in question, bitcoin has experienced a massive change in its reputation and in how it’s looked at by common, everyday traders. Bitcoin is now being viewed as a store of wealth – something that can potentially hedge one’s portfolio against economic inflation and other problems.
The report further states:
[Bitcoin] is beginning to mature into a store of value, although this is not how it has behaved in the past. A bitcoin portfolio weight of just under four percent is optimal in a traditional 60/40 portfolio.
Working More Like Gold?
Research strategist for the firm James Butterfill has pointed out that bitcoin is no longer directly correlated with stocks, but is beginning to mimic the price and behavioral patterns of gold, which is also considered a long-term store of value and much more stable than stock shares. He mentions:
We are already seeing an increase in bitcoin’s correlation to inflation and gold, also a store of value. We expect that some investors will always treat [bitcoin] as a tech stock given its links with tech, though.