The economic recession and uncertainty on the financial market have many investors looking into whether cryptocurrencies, such as bitcoin, are a successful investment.
A Japanese analyst has forecast high demand from institutional investors for the Bitcoin post-coronavirus crisis, giving three main reasons why the cryptocurrency is attractive.
High demand for Bitcoin after the COVID-19 Pamdemic is over
The covid-19 pandemic has led to an economic downturn unparalleled, with the IMF declaring it the worst recession since the Great Depression.
Industries are missing their forecasts of profits and no conventional investments have made a breakthrough.
The recession has investors desperately trying to find safe haven assets and more people are now asking whether cryptocurrencies, including bitcoin, are a successful investment.
Bitcoin Lab CEO Tetsuyuki Oishi, a guest cryptoanalyst at Japanese financial firm Fisco, shared three reasons earlier this week why he saw considerable demand from institutional investors for post-pandemic cryptocurrencies.
Firstly, he said that after the coronavirus epidemic the stock market may lose its value due to lower need for the goods of many companies, resulting in long-term reductions in corporate income.
“Most consensus is that a V-shaped recovery of stock prices is difficult. Therefore, investors need to seek out investment options other than stocks. Investors can’t just put everything in cash.”
Next, the analyst believed that cryptocurrencies are attractive because the connection between them and conventional investments is still very weak.
He explained: “Of course, all assets were sold during the fall, both gold and bitcoins were sold, but they picked up afterwards … As a result, there is more space for integrating assets that will have little connection with the uncertain future society.”
Another reason investors would be more interested in cryptocurrencies relative to other forms of assets is that “among these uncorrelated assets, cryptocurrency is the one assets investors are yet to incorporate “-Oishi said
Regarding the amount of interest on cryptocurrencies, the analyst quoted the Q1 2020 earnings report from Grayscale Investments showing capital inflows totalling $503.7 million into investment products for cryptocurrency.
“This is the largest ever size,” he wrote, adding that BTC’s $388.9 million went into the Grayscale Bitcoin Trust.
In addition, institutional investors accounted for 88 per cent of all investments made in the quarter.
Oishi said, “It’s good news that market interest in virtual currency hasn’t diminished,” adding that institutional investor interest is likely to continue despite the coronavirus crisis.
Financial experts advice on Bitcoins in Portfolios
Financial experts had already suggested some exposure to cryptocurrencies within investment portfolios before the spread of coronavirus and subsequent economic turmoil.
For example, JPMorgan wrote in a February paper that “the crypto-market continues to grow and the involvement of institutional investors in crypto-monetary trading is now important.
” Predicting that “bonds that lose their ability to hedge equity portfolios over the next few years,” the firm indicated that “less restricted markets such as yen and gold could be part of long-term hedges.”
In addition, numerous finance experts have proposed that bitcoin be included in investment portfolios.
Robert Kiyosaki, author of Rich Dad Poor Dad, has repeatedly said the dollar is dead and people will invest their stimulus money in bitcoin.
Chamath Palihapitiya, Virgin Galactic chairman, has always supported and voted for assigning at least 1 per cent of portfolios in bitcoin.
Moreover, Galaxy Digital chairman Mike Novogratz pointed out that buying bitcoin is prime time for all the money that central banks print.