The global crisis and financial market turmoil have many investors looking into whether cryptocurrencies, such as bitcoin, are a good investment for them. A Japanese analyst has predicted high institutional investor demand for bitcoin post coronavirus crisis, giving three key reasons why the cryptocurrency is an attractive investment.
High Institutional Demand Expected Post Coronavirus Crisis
The covid-19 pandemic has led to an unprecedented economic crisis, with the IMF calling it the worst recession since the Great Depression. Companies are missing their earnings estimates and many traditional investments have taken a hit across the board. The crisis has investors scrambling to find safe haven assets, and more people are now asking whether cryptocurrencies, such as bitcoin, are a good investment.
Bitcoin Lab CEO Tetsuyuki Oishi, a guest crypto analyst at Japanese financial company Fisco, shared three reasons earlier this week why he sees considerable demand from institutional investors for cryptocurrencies post the pandemic.
Firstly, he said that the stock market may lose its attractiveness after the coronavirus crisis due to decreased demand for many companies’ products, resulting in long-term declines in corporate profits. He elaborated:
Most consensus is that a V-shaped recovery of stock prices is difficult. Therefore, investors need to seek out investment options other than stocks. Investors can’t just put everything in cash.
Next, the analyst asserted that cryptocurrencies are attractive because there is still very little correlation between them and traditional investments. He explained: “During the plunge, of course, all assets were sold, both gold and bitcoins were sold, but they picked up thereafter … As a result, there is more room to incorporate assets that will have little correlation with the uncertain future society.”
Another reason why investors will be more interested in cryptocurrencies compared to other asset types is that “among such uncorrelated assets, the one most investors have not yet incorporated [into their portfolios] is cryptocurrency, especially BTC,” Oishi opined.
Regarding the level of interest for cryptocurrencies, the analyst cited Grayscale Investments’ Q1 2020 earnings report showing capital inflows totaling $503.7 million into cryptocurrency investment products. “This is the largest scale ever,” he wrote, adding that $388.9 million went into Grayscale Bitcoin Trust for BTC. Furthermore, 88% of all investments made in the quarter were by institutional investors. Oishi added, “It is good news that investors’ interest in virtual currencies has not declined,” concluding that interest from institutional investors is expected to continue after the coronavirus crisis.
Financial Experts Recommend Bitcoin in Portfolios
Before the spread of coronavirus and subsequent economic turmoil, financial experts were already recommending some exposure to cryptocurrencies within investment portfolios.
JPMorgan, for example, wrote in a February report that “The crypto market continues to mature, and cryptocurrency trading participation by institutional investors is now significant.” Predicting that “Bonds may lose their ability to hedge equity portfolios over the next several years,” the firm suggested that “less-constrained markets like the yen and gold should form part of long-term hedges,” elaborating:
Cryptocurrencies should be added to this list too … because they can uniquely hedge a yet-unseen environment entailing simultaneous loss of confidence in the domestic currency and its payments system.
Furthermore, various finance experts have recommended putting bitcoin in investment portfolios. Rich Dad Poor Dad author Robert Kiyosaki has repeatedly said that the dollar is dead and people should invest their stimulus money in bitcoin. Virgin Galactic chairman Chamath Palihapitiya has long vouched for allocating at least 1% of portfolios in bitcoin. In addition, Galaxy Digital chairman Mike Novogratz pointed out that with all the money printing central banks are doing, it is prime time to buy bitcoin.
Do you think more people will invest in bitcoin post covid-19? Let us know in the comments section below.
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