Market awaits direction
Bitcoin has been trading within a narrow range for months, as if the market is catching its breath after the shock earlier this year. Large movements are absent, but that does not mean nothing is happening. On the contrary: behind the scenes, large players are increasing their positions and the debate is shifting from whether Bitcoin belongs in a portfolio, to how much is advisable. More on this in this edition of the Market News.
Market update
The price of Bitcoin is currently at ā¬59,000, right in the middle of the range seen over the past nine weeks. Since the price drop in January, the weekly close has consistently been between ā¬56,000 and ā¬64,000, a spread of less than 15%. This is comparable to the final quarter of last year, when the price moved sideways between ā¬74,000 and ā¬81,000 for ten weeks.
It is striking that this period of calm in the crypto market coincides with the turbulence of the war in Iran. Altcoins have also remained relatively stable compared to Bitcoin, with notable upside moves from tokens such as Hyperliquid (HYPE) and Bittensor (TAO).
It is tempting to interpret this as evidence of the beginning of a new bull market. That would be unusually quick; bear markets usually take longer to form a bottom. A more cautious approach would be to wait for a weekly close above the 50-week average, which is currently at ā¬84,000.
Moving averages with a duration of about a year have been a useful dividing line between bull and bear markets in recent years. That threshold is still quite high at ā¬ 84,000, but it will likely fall over the coming months. If the price remains around ā¬60,000, the 50-week average will drop to ā¬74,000 in three months. For investors looking to follow the market cycle, that could present an attractive entry point.
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Fidelity: a 0% Bitcoin allocation is increasingly hard to justify
Fidelity, one of the world's largest asset managers, says in a new report that Bitcoin deserves a fixed place in the portfolios of a broad group of investors. The size of that allocation is also notable: around 10% in their view, can be well justifiable.
The report, with the telling titleĀ Getting Off Zero, revolves around one central question: how much Bitcoin should be included in an investment portfolio? For years, the discussion focused on whether Bitcoin deserved a place at all. According to Fidelity, that stage is now over. Investors who remain at zero have some explaining to do, argue Fidelity's analysts.Ā¹
At its heart, the analysis is simple. Over longer periods, Bitcoin has delivered remarkably strong returns. At the same time, the price often moves differently than that of stocks and bonds. This makes Bitcoin an interesting addition, as it can help improve diversification within a portfolio.
Fidelity analysed historical performance over both five and ten years. It is notable that Bitcoin not only performed well, but did so relatively efficiently: the risk-reward ratio is more favorable than with traditional investments. Even in the more moderate period of the past five years, this pattern remains intact.
Based on simulations, Fidelity concludes that even a small position can be beneficial, but that the effect increases as the allocation grows. Up to about 10%, both the expected returns and the risk-reward ratio improve. In other words, a modest Bitcoin position can be meaningful, but a slightly larger position can yield even better results.
It is also interesting to consider where that Bitcoin allocation comes from. Where investors previously saw a position mainly as an alternative to stocks, capital is increasingly coming from bonds. These have delivered less than expected in recent years. However, according to Fidelity, that distinction is of secondary importance: in both cases, investors tend to benefit from making the leap from zero to some exposure.
In the analysis, Fidelity uses a well-known calculation method from the investment world, which looks at the ratio between potential returns and risk. Because Bitcoin historically has a strongly asymmetric profile, the model unexpectedly points to a relatively high āoptimalā allocation, running into the tens of percent.
While the asset manager recognises that institutional investors are unlikely to be allowed to allocate at that level, the conclusion remains striking. The debate is no longer about whether Bitcoin belongs in a portfolio, but how much and why. For those still at zero, that position is becoming increasingly difficult to defend.
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In other news
Morgan Stanley aims to break into the Bitcoin fund market with low costs. The bank plans to offer its new Bitcoin fund with a management fee of 0.14%. This undercuts existing products, such as those from competitor BlackRock. This pricing strategy could help the bank gain market share rapidly. The bank's extensive network of wealth advisors is seen as another key advantage. ETF watchers expect the fund to launch within the next two weeks.
UK plans to ban crypto donations to political parties. The government led by Starmer is moving to act after concerns about foreign influence through hard-to-trace money flows. Crypto is seen as a potential backdoor. The proposal follows an independent investigation and still needs to be approved by Parliament. Donations in traditional currencies will continue to be permitted, even for parties with ties to the crypto sector. A similar approach is being considered in Canada.
JPMorgan: Bitcoin is increasingly behaving like a safe haven. During the Iran crisis, capital flowed into Bitcoin, while investors exited gold and silver. According to the bank, this indicates a shift in how investors deal with geopolitical uncertainty. In countries like Iran, the use of crypto has also increased, as citizens try to protect their wealth against economic instability and capital restrictions.
Strategy increases capital capacity for Bitcoin purchases. The company led by Michael Saylor aims to raise up to $42 billion in new funding. This will involve a combination of stock issuances and preferred financing, spread across multiple programs. Data from CryptoQuant shows that Strategy is now responsible for more than 75 percent of the demand for Bitcoin among publicly traded companies. This underscores Strategy's influence, but also how skewed this part of the market has become.
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Satoshi Radio: InĀ the latest episode of Satoshi Radio, the hosts highlight a notable event in the world of bitcoin miners. One mining pool managed to mine seven blocks in a row. Is that a problem? Additionally, the performance of crypto funds is discussed, as well as the rapid rise of Hyperliquid. Stablecoin company Circle experienced a particularly red trading day. As always, the episode concludes with the market update.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.