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Investors are irresponsible if their portfolios have no exposure to bitcoin, according to Anthony Pompliano of Morgan Creek Digital Assets.
The co-founder & partner said in his latest “Off the Chain” podcast that it makes sense for fund managers and investors to keep 1 to 5 percent of their capital in bitcoin. He explained that the cryptocurrency is presenting itself as the perfect global hedge in times of economic uncertainties. That should prompt investors to take notice as their investments in the mainstream markets threatens to shrink any further.
“We are living in exceptionally volatile and unpredictable times. Institutional investors have sought out non-correlated assets as portfolio diversification tools for decades,” wrote Pompliano. “Now that Bitcoin is presenting itself as the perfect global hedge, it will quickly become irresponsible for these investors to remain with 0% exposure to the digital currency.”
The inverse correlation between $SPX (blue) & #Bitcoin (Candles) / #Gold (orange) remains strong. My thesis is money will continue to flow into these assets in a slowly declining market. If it turns into a crash they may get sold off in a scramble for liquidity. pic.twitter.com/xsS7iuTURY
— Alex Saunders 🇦🇺👨🔬 (@AlexSaundersAU) August 5, 2019
Economy in Red
The statements borrowed sentiments from the economic uncertainties arising on a global scale. United States President Donald Trump has escalated his trade war with China after threatening to impose an additional 10 percent tariff on $300 billion worth of Chinese imports. In response, Beijing depreciated its national currency – the Chinese Yuan – below $7 for the first time in eleven years.
China continues to remain unfazed. The superpower announced yesterday that it is suspending agricultural purchases from the US. The White House, in retaliation, branded Beijing as a currency manipulator.
The result of the catfight is an economy in red. Global markets are plunging, with both Asian and US equities falling right of a cliff.
Fragile calm returns to stock mkts as Yuan steadies. Asia equities not able to fully follow through rebound on Wall St after PBOC set Yuan daily fix marginally stronger than 7 a dollar. Bonds continue rally w/US 10y yield at 1.68%, Gold at 6y high, Brent Oil w/ $58.85 in bear mkt pic.twitter.com/cEdGPofe9X
— Holger Zschaepitz (@Schuldensuehner) August 7, 2019
Among the assets that are returning profits amidst an economic meltdown is bitcoin. The non-sovereign asset is performing exceptionally well as investors flock towards its market for their reasons: to fight capital control in China, to protect their investment portfolios, or whatnot.
“Bitcoin,” wrote Pompliano, “is a non-correlated, asymmetric return-profile asset. It has proven even to be inversely correlated in times of increased global instability. Take May 2019, for example — the trade wars were escalating, and threats of tariffs were being lobbed at multiple countries. Bitcoin was up 55% for the month and showed a negative correlation to the S&P 500 and gold.”
The Anti-Bitcoin Views, Meanwhile
The inverse proportionality between bitcoin and global markets is visible on the charts. Nevertheless, some financial experts believe the ones that are driving the cryptocurrency higher are not investors, but speculators. Peter Schiff of Euro Pacific Capital thinks on the same lines.
Bitcoin may be up more than gold or silver today, but gold and silver stocks are up more than Bitcoin. Since there is much more upside potential with less downside risk in mining stocks than there is in Bitcoin, speculators should move from Bitcoin to precious metals stocks!
— Peter Schiff (@PeterSchiff) August 5, 2019
“Why does CNBC allow Brian Kelley to lie about Bitcoin,” he tweeted about a Squawk Box coverage about the cryptocurrency’s rise. “He just assured viewers that a new high in Bitcoin is a certainty because for the first time an institutional herd is now buying. Brian, I challenge you to identify those institutional investors that have piled in!”
