Fidelity Digital Assets Chief Digital Asset Strategist Matt Horne recommends that investors consider allocating a small portion of their portfolio to Bitcoin, rather than spending too much time trying to understand the cryptocurrency. this chemistry. He believes that holding Bitcoin in small proportions (between 1% and 5%) can bring potential profits and reduce portfolio risk.

The event took place at the 2024 Vision cryptocurrency investment conference organized by the Digital Asset Council of Financial Professionals (DACFP) in Austin, Texas on March 12, 2024. Matt Horne, head of digital asset strategy at Fidelity Digital Assets – the management and trading arm of Fidelity for institutional investors, offers practical advice for investors and financial advisor on digital asset allocation in investment portfolio.

Mr. Horne believes that investors are spending too much time learning and analyzing Bitcoin, ignoring potential investment opportunities. “You can have many investment theories about Bitcoin and that's okay,” Mr. Horne shared. “Most investors are saving money, investing money with an advisor to achieve a long-term goal like retirement.”

“A small position in an asset like Bitcoin may be suitable for many clients, given their long-term time frame and position size appropriate to their risk,” Horne added. 

The arrival of the Bitcoin ETF in the US market six months ago was an important step forward allowing financial advisors to guide wealthy clients to invest in Bitcoin through managed funds. However, many investors are still not participating in this market due to many reasons, including high price volatility, lack of trust, limited understanding of this asset class, legal regulations and lack of history. transaction.

“We spend a lot of time arguing about disruptive technology, venture capital or digital gold, and I think all of those things are fine,” Mr. Horne added. “Your hypothesis will determine the size of the position and possibly its supply in the portfolio.”

Experienced investors and asset managers often recommend a small allocation of between 1% and 5% to Bitcoin to increase portfolio risk without exposing yourself to too much of the cryptocurrency's price fluctuations. 

“If the worst case scenario occurs and Bitcoin goes to zero, the impact on the overall portfolio will be minimal due to the position size,” Horne explained. “If it grows according to popular expectations, increasing in price over time, you'll want to make sure your customers have some exposure to it.”

The Fidelity expert admitted that Bitcoin is quite young – only about 15 years old, and has actually only been worth tracking since 2015 – making modeling “impossible”. However, that doesn't matter. It is important for advisors and investors to gain knowledge about this new area of ​​investing.

“It's very difficult because many professional investors can model every other asset class based on the current amount of data,” he said. “With digital assets, you don't have that condition... and I think that's fine,” he added. “That's why you just need to understand why you want to own it, understand the potential of this technology and then position accordingly.”

Horne's advice is highly topical, consistent with current digital asset investment trends. Allocating a small portion of an investment portfolio to Bitcoin, despite the volatility and lack of understanding of the asset class, can provide potential returns and minimize investor risk. However, the decision to invest in Bitcoin should be carefully considered based on each individual's risk tolerance and financial goals.