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Is it the right time to invest in Bitcoin? What the experts say
In recent months, however, things have started to improve. Cryptocurrency investors he became more and more convinced that the SEC would approve of a years-long effort by fund companies to bring about spot bitcoin exchange-traded fund on the market, a move that is expected to fuel demand for the popular currency.
When the news broke on January 10th 11 new bitcoin ETFs will begin tradingcryptocurrency investors were taking a victory lap, having sent the price of the coin soaring 155% in the 2023 calendar year.
So what time? Are we headed for another cryptocurrency bull market or have bitcoin enthusiasts gone too far?
“This is definitely a game changer,” says Brian Vendig, president of MJP Wealth Advisors in Westport, Connecticut.
Here’s what he and other experts say to expect from here.
The new wave of bitcoin ETFs makes it easier than ever for investors in more traditional assets, such as stocks and bonds, to dive into cryptocurrencies. Instead of having to open a separate account to buy cryptocurrencies – often with high trading fees – ETF investors can hold bitcoin alongside their other investments in their brokerage accounts.
This is just the beginning, says Matthew Sigel, head of digital asset research at VanEck, an investment firm offering one of the 11 new funds.
“We believe this was a huge step forward that will unlock significant demand, given the cost savings for the retail buyer and the security available to institutional buyers,” he says.
The new ETFs will soon allow advisors who deal with high-net-worth clients and large-capital institutions to start incorporating cryptocurrencies into their portfolios, he adds.
“They don’t yet have the ability to get these bitcoin ETFs into clients’ discretionary portfolios,” Sigel says. “But we can observe that several banks and intermediaries are already preparing these models, which we expect to emerge by the end of the year.”
Expect other new crypto ETFs too, and in different versions.
“It seems inevitable that we will have ETFs tied to ether, as a secondary cryptocurrency for people to invest in,” says Todd Rosenbluth, head of research at VettaFI. Meanwhile, he says, “the door is now open for a range of ETFs that include bitcoin and other assets.”
Experts say these could be as simple as portfolios that combine bitcoin exposure with traditional investments, such as those in the S&P 500. More complex so-called alternative strategies are also likely to emerge, such as funds that use a bitcoin holding to hedge against the performance of other investments.
Bitcoin’s rapid price rise of late would seem huge for a traditional asset, like a stock or bond, but it’s really nothing to write home about in Cryptoland, says Stephane Ouellete, founder and CEO of FRNT Financial.
“You’ve seen some speculation around the bitcoin ETF announcement, but all the metrics we look at to gauge where we are in the market cycle tell us we’re so far from the FOMO market where everyone and their dog is talking about cryptocurrencies,” he says.
Measures such as bitcoin and cryptocurrency searches on Google Trends, funding for crypto companies and investor trading volumes are all relatively modest, he says. In other words, if the cryptocurrency market is going to enter another bull trading cycle, we are just getting started.
That doesn’t necessarily mean it’s time to pile on, though. Bitcoin Experts Not Buying Due to ETF Launch. Rather, they believe in the long-term potential of bitcoin as a store of value and alternative payment system in developing countries. They believe in a future where blockchain technology develops into an increasingly important part of the US economic ecosystem.
This may never happen. And even if you believe in a long-term thesis, remember: Cryptocurrencies don’t trade based on underlying fundamentals like stocks do. This means that prices move solely based on investor activity.
“It’s still all speculation. That hasn’t changed,” Vendig says.
If you’re thinking about adding cryptocurrency to your portfolio, ask yourself what role it can play in helping you reach your personal financial goals, he says.
“If an investor can respond appropriately, then you can actually understand the sizing you should have,” he says. “Do you want to dive into this asset class? Or is that asset class not even rational for you as an investor?”
If you invest in cryptocurrencies, Vendig recommends keeping things small. “I would say 1% on the more conservative side and no more than 5% of your total portfolio if you are a growth-focused investor.”
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