On alot of cryptorelated forums people are focussed on the correlation with BTC and institutional money that might come into play. Decoupling is so often mentioned that it might seem that coin x is ready to take over the top position right now.
I intent to help you to look at the bigger picture what might help you in the choices that you make in creating your portfolio.
Disclaimer: I invested in EOS, ETC, XRP and BTC / crypto is >50% of my total portfolio.
- Blockchain and crypto are in their infant phase – correlations within this class are not that useful because the market is not stable yet. A breakout is often related to a specific event or an expected event. Or the market is simply manipulated to suppress a movement. Correlations within this class will be useful in the future if and when blockchain is fully embraced.
- Crypto will start as an hedge for institutional investors. I do believe that institutional investors will be investing billions if not trilions in crypto. This does mean that I expect that Institional investors will allocated 1-5% of their worth in crypto – similair to gold. Crypto will provide an awnser for “what if” questions, they will not have to believe in it.
- The common hedge is “precious metal” which is more than just gold. Still most commenly you see that gold is most prominent in the hedging positions – the prospects of silver are actually better than gold for they coming years. This is the same for Crypto and BTC. Ask someone about crypto and they will expect that you want to talk about BTC – regardless of other crypos have a seemingly better prospect. Therefore i will expect that the hedge will either be BTC or a tracker of top 10 – 100.
- So why not 100% BTC? BTC will be the default hedge but other crypto might provide an awnser to a specific questions – meaning that they could attract specific interest from investors -> if you believe in their product go for it.
- To hedge the “time” risk you can spread your investment over time (well covered method is the dollar average method)
TL:DR:looking from an investors point of view, i believe crypto will be mainly used as hedge to migrate risks, those investors will not look into the specifics of a coin but invest in either btc or a tracker (this will be largest portion of the capital inflow). There will be usecase specific investments (although i do believe this will be a smarter portion of the inflow).
What do you guys think?