BBVA: Bitcoin & Ether Boost Portfolio Performance

Incorporating Bitcoin and Ether, two predominant cryptocurrencies, into traditional investment portfolios can considerably enhance returns. Philippe Meyer, head of digital and blockchain solutions at BBVA, underscores the potential of these digital assets. During the Web3 Corporate Innovation Day, Meyer emphasized that incorporating a modest share of digital assets such as Bitcoin or Ethereum elevates portfolio performance notably. He stated, “Allocating around 3% to 5% of your total assets to crypto can make a significant difference.”

Meyer further elaborated that a slight inclusion of cryptocurrencies in portfolios could substantially amplify investor returns. He asserted, “Anyone aiming for improved returns on their investments should contemplate adding this asset class.” His comments come amidst an ongoing bullish trend in the cryptocurrency market, highlighted by Bitcoin’s impressive surge by over 146% within the past year, maintaining a trading value above $65,383.

The performance of Bitcoin in 2024 has markedly outshined that of the S&P 500, an index reflecting the performance of the 500 largest publicly traded companies. Since the beginning of the year, Bitcoin’s price has appreciated over 47%, whereas the S&P 500 has only seen a 15% increase. This data indicates that Bitcoin has outperformed the S&P 500 by more than three times, showcasing its high returns potential.

On an annual scale, the divergence in returns between Bitcoin and the S&P 500 is even more pronounced. Bitcoin has increased by 147% over the year, compared to the S&P 500’s 24% rise. This translates to Bitcoin outperforming the stock index by over sixfold, thereby presenting a compelling case for its inclusion in investment portfolios.

Bitcoin has experienced a dip in the short term, falling 2.3% over the past month, while the S&P 500 has gained 2.8% during the same period. This short-term volatility is not uncommon in the cryptocurrency market and reflects the fluctuating nature of digital asset valuations.

The current correction in Bitcoin’s price is attributed to a decline in inflows from U.S. spot Bitcoin exchange-traded funds (ETFs). Recent trends show that U.S. Bitcoin ETFs ended a 20-day streak of positive net inflows, experiencing three consecutive days of negative outflows. On June 17, these ETFs saw over $145 million in outflows, as reported by Farside Investors.

According to Jag Kooner, head of derivatives at Bitfinex, the primary cause behind these outflows is a lack of conviction among ETF investors, who are selling below their initial cost basis. Kooner explained that ETF investors tend to amplify market movements, citing a similar pattern when there were significant net inflows over $1 billion back in late April when Bitcoin’s range highs were above $70,000, followed by notable outflows as prices approached $60,000.

In light of these developments, it’s essential for investors to stay informed about both the opportunities and risks associated with cryptocurrency investments. The potential for high returns is coupled with inherent market volatility, necessitating a balanced and well-thought-out approach.