The trillion-dollar asset manager Fidelity is laying out how Bitcoin (BTC) could reach a $1.3 billion market cap.
In a new report done in collaboration with top investors and thought leaders in the investment industry, Fidelity argues that Bitcoin’s market capitalization could skyrocket if it captures a fraction of the alternative investment market.
“If bitcoin were to capture 5% of the alternatives market as measured by CAIA, that would equate to an incremental $670 billion growth in its market size. If it were to capture 10%, that would expand its market size by $1.3 trillion.”
According to Fidelity, the alternative investment market – which includes real estate, infrastructure, private equity, hedge funds, natural resources, private debt, and commodities derivatives – has grown to $13.4 trillion to occupy 12% of the global investible market in 2018.
The asset management giant highlights that the Chartered Alternative Investment Analyst Association (CAIA) is projecting that alternatives will likely surge to 24% of the global investible market by 2025.
Fidelity also explains why investors are motivated to buy the leading cryptocurrency.
“The rationale of certain bitcoin holders for allocating to bitcoin is similar to their rationale for allocating to alternative investments—notably, portfolio diversification and return enhancement. Additionally, the interest in bitcoin and other non-yield-generating alternative investments could also increase in response to the Federal Reserve (and many other central banks) cutting their benchmark interest rate to zero (or below zero) this year. In a world where benchmark interest rates globally are near, at, or below zero, the opportunity cost of not allocating to bitcoin is higher.”
However, Fidelity cautions that as more institutions enter the Bitcoin market, BTC could become more correlated and vulnerable to external events.
Still, Fidelity believes that Bitcoin has distinct advantages over other assets.
“However, Bitcoin is fundamentally less exposed to the prolonged economic headwinds that other assets will likely face in the next months and years. Combined with its multifaceted narratives and an interesting effect of persisting retail and growing institutional sentiment, it could be a potentially useful and uncorrelated addition to an investors’ portfolio toolkit.”
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