The proportion of bitcoin in the portfolios of institutional investors may soon reach 3% or more, according to Bitwise. There had been an opinion in the institutional environment that in the event of a BTC collapse, its share in the portfolio would be no more than 1%, despite the impressive outperformance. Why is the share of BTC in portfolios on the rise? What does this mean? And what happens if it reaches, say, 10%?
The uptick in the proportion of bitcoin in the portfolios of institutional investors to 3% or more is due to several key factors:
1. The launch of spot BTC ETFs stateside has reduced the risks associated with the possibility of bitcoin going to zero. Now even conservative investors believe that the likelihood of a complete bitcoin collapse is low, so a portfolio share of 3-5% begins to seem more reasonable.
2. High inflows into spot BTC ETFs (about $11.7 bln over 2 months) demonstrate steady long-term demand from investors. This trend is expected to continue over the coming years.
3. The process of adding cryptocurrencies to the portfolios of institutional players is uneven. Some financial advisors already allocate 3% to bitcoin for all clients, while others have not yet started.
Increasing the share of bitcoin in portfolios to 3-5% will help mitigate volatility, as more investors rebalance positions when the price moves up/down.
If the share of bitcoin in the portfolios of institutional investors reaches 10%, this will make the market more resilient to fluctuations in speculative supply and demand, while raising systemic risks in the event of a sharp drawdown of the cryptocurrency.
Therefore, further increases in the scope of institutional investors' investments in bitcoin should occur slowly but surely.