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Ben Laidler says bitcoin’s growth is only just beginning as institutional investors enter the arena. He says the asset’s value comes from its risk-adjusted returns and low correlation with other assets. He also shares three altcoins which he says are gaining popularity right now. See more stories on the Insider business page.
EToro is a multi-asset brokerage firm that saw 3.1 million new users flock to its platform in the first quarter of 2021. Growth was more than double the million earned last year in the same quarter.
What’s slightly unique about eToro’s platform is that it offers a social element by allowing investors to view and copy the trades of other successful investors.
The influx of new customers is in line with, and in part attributable to, the growth of retail investors and the growing popularity of cryptocurrencies that occurred late last year and early 2021.
Ben Laidler, the global markets strategist for eToro, set out his recent observations in an interview and said that when it comes to cryptocurrencies, the sector’s growth is only just beginning, especially as institutional investors are starting to enter space and add bitcoin to their wallets. .
He shared with Insider what he thinks is the most appealing about bitcoin and added his take on altcoins that are growing in popularity.
The real value of Bitcoin
While most investors view bitcoin as a store of value, two key things increase its attractiveness, Laidler explains. The first is its risk-adjusted returns and the second is its low correlation with other asset classes.
Bitcoin made headlines in April after experiencing a 50% decline in four weeks. Despite this, Laidler claims that bitcoin is still a high performing asset class.
“No matter what kind of time periods you’ve looked at, the risk-adjusted returns of crypto assets are significantly higher than any other asset class,” Laidler told Insider, referring specifically to bitcoin.
“People find it shocking. You know, bitcoin is still up 30% this year. The next best performing asset class, commodities, is sort of up 20% to 23%,” he adds. The Bloomberg Galaxy Crypto Index, a larger gauge of the largest digital currencies traded in dollars, has gained 112.5% this year.
The second key to bitcoin’s attractiveness is its low correlation with all other asset classes, explains Laidler.
“Longer term, it’s negatively correlated. And that means if stocks go up, cryptocurrency goes down, and vice versa. So it’s a long-term relationship. The shorter-term relationship is just weakly. correlated. So if stocks go up a lot, crypto goes up a little. If stocks go down a lot, crypto goes down little, “Laidler says.
What this simplistically means is that despite the very high volatility, an investor can add bitcoin to a broadly diversified portfolio and that can reduce the risk in that portfolio, Laidler says.
As for the ups and downs in bitcoin prices, this is part of the growing difficulties since the asset has only been around for about 12 years. But as more institutional investors add it to their portfolios, he believes there will be a reduction in volatility.
Other cryptocurrencies on the rise
When it comes to cryptocurrencies other than bitcoin, Laidler says there is generally growing interest in proof-of-stake currencies, which is a form of consensus that uses a network of validators but does not require consumption. high energy. Laidler adds that this is likely due to the growing interest in ESG investments, which are intangible measures related to sustainability.
He says the growing emphasis on clean energy and efficiency, combined with Tesla’s recent decision to stop accepting bitcoin, has placed a positive emphasis on green mining platforms and assets n ‘not using energy-intensive proof-of-work systems, but rather pre-mined or consensus (PoS) mechanisms.
He says the beneficiaries of this trend are:
Cardano (ADA), which has seen a 702% increase since the start of the year. Polkadot (DOT), which has seen a 30% increase since the start of the year. Solana (SOL), which has seen an increase of 2,657% since the start of the year.
While Laidler has an enthusiastic take on bitcoin and other cryptocurrencies, he doesn’t recommend investing in something you don’t understand.
“Education, diversification only invests in things you understand and only invests as part of a broadly diversified and larger portfolio. So whatever you do, don’t just invest in bitcoin , make it a small part of your overall portfolio, ”says Laidler.
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