In a major shift within the financial industry, Fidelity Investments, with its colossal $12.6 trillion in assets under management, now recommends that the traditional 60/40 portfolio model should evolve towards a 1-3% allocation to crypto, with mainly via the spot market. Bitcoin ETF (FBTC). This groundbreaking move is not just a nod to the burgeoning crypto market, but a potential catalyst for unprecedented demand, potentially funneling hundreds of billions of dollars into Bitcoin.
Matt Ballensweig, head of Go Network at BitGo, took to X (formerly Twitter) to express his expectations: to report“I’ve been saying this since the day of ETF approval – now that Pandora’s box has been opened, the multi-trillion dollar asset managers will sell BTC and crypto to us through their vast distribution channels. Fidelity is now creating blueprint portfolios with 1-3% crypto.”
Echoing this sentiment, Will Clemente III, a renowned analyst, commented on the potential ripple effects of Fidelity’s recommendation. “Fidelity now recommends a 1-3% crypto allocation in your portfolio. Gateway medicine. What happens when that 1-3% becomes 3-6%? Slowly and then suddenly,” Clemente noted, highlighting the potential for growth in crypto allocation.
What this could mean for the Bitcoin price
Adam Cochran, partner at CEHV, continues elaborated on the implications of Fidelity’s move for Bitcoin’s adoption and price trajectory. In a detailed analysis shared on “How damn wild is this to see. 60/40 portfolios are now 59/39/2,” Cochran began, underscoring the historic milestone of crypto becoming a core asset class.
Comparing the adoption rate of the Internet to cryptocurrencies, Cochran says, “The Internet was thirty years in the making and only reached ten million users in 1995. But the most non-conservative estimates put crypto ownership worldwide at 450 million (conservative is conservative). over 200 million), which is like the Internet in 2001.”
He emphasizes the outsized economic impact of digital progress: “Today the Internet has some 5.5 billion users – twelve times as many as in 2001. But according to BEA, the impact of the digital economy has grown exponentially with each year of growth.” By drawing this parallel, Cochran is paving the way for a crypto market that could see exponential growth in value and influence.
Cochran’s approach to calculating Bitcoin’s future valuation involves analyzing the potential inflows of funds from traditional investments. “If that follows the change to 39/59/2, you’re looking at $1.6 trillion in new purchases… Considering today’s market has a total market cap of $2.24 trillion… we get a cash-to- value rate of 9.3%.”
The core of Cochran’s analysis lies in his valuation prediction, in which he states: “Prorate between coins at their current ratios and that is $748,500 BTC and $43,635 ETH in raw spot buying. But because we know the theoretical causes make things work, and we have things like ETH yield demand and burnout, we are usually several multiples above our raw spot demand price.”
Cochran’s conclusion reflects a strong belief in the transformative potential of cryptocurrencies within traditional investment portfolios. “Ultimately, even gold hasn’t broken into the 60/40 portfolio in a meaningful way, so I don’t think it’s a good idea to exceed the $12 trillion gold mcap by a significant multiple over time.”
At the time of writing, BTC was trading at $57,175.
Featured image created with DALL·E, chart from TradingView.com
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