If it seems to you that bitcoin has a stratospheric price, above $60,000 (after this year it even exceeded $70,000), sit back and take a deep breath, because its price is not only very good market for those responsible for the first crypto-asset fund in Spain, but it is far from the 200,000 dollars that it could reach in the coming months. And all this because of a psychological effect as impulsive as fomo (fear of missing out), the fear of missing out, which grips investors.
“The human brain is not ready to buy bitcoins at $70,000 when you saw them trading at $25,000 a few months ago,” says Román González, who runs the Cryptocurrencies hedge fund with Rubén Ayuso within the private bank A&G. “But we believe the price of bitcoin still falls well short of reflecting its utility.” The lack of knowledge about the properties of bitcoin means that its price is cheap. “That’s why we wouldn’t be surprised to see it trading well above $200,000 in the coming months,” he says.
The managers of the fund, which has appreciated by more than 44% in one year thanks to the impetus given by the appearance of the first ETFs on bitcoin in the United States, warn however that you must be ready to support a high volatility on an asset which can go from a maximum price in a few months to drops of 50% in its value.
⇣ 66,531.83
13 Jun
⇡ 68,306.30
“The price of this asset generates a lot of fomo, because it goes up very quickly, in an elevator, and back down in an escalator. The complete opposite of what happens with stocks. And this has a pernicious effect on the human mind, because you have to be invested in an asset that has fallen sharply and continues to fall for a prolonged period of time,” explains González, who points out that cryptoasset cycles typically last four years, with an average bull phase of around nine months, which means that in this time frame “you have captured more than 78% of the profitability of the cycle”. We must therefore be careful not to think that it is too expensive and that it is better to wait,” he warns, because “if you are able to keep the investment for at least these four years, the chances of success are very high”.
“Analyzing the highs reached in recent cycles, we see that in 2017 it reached $20,000 and in 2021 it reached $70,000, that is, it was multiplied by 3.5 times its value. That year, we already felt that strange things were happening, like what happened with the broker FTX or Celsius. And if we apply this multiplier today, we are talking about a capacity to exceed $250,000. It is an asset that behaves in a practically perfect cycle, but we do not know whether it will repeat itself or not,” explains Mr. Ayuso, who warns that along the way “there will be drops of 70% ” which investors will have to be prepared to bear.
In fact, the $200,000 valuation is well below the $1 million that famed tech guru Cathie Wood estimates it will reach by 2030. “I wouldn't be surprised and it's possible it won't is not reached. Once an asset is capitalized and its nominal price is higher, for the human brain it is already expensive, as is the case now that it is trading at around $70,000,” emphasizes Mr. González .
The arrival of large institutional investors, such as the government of Wisconsin (United States), will, according to him, promote the growth of bitcoin in the years to come, as well as a more massive entry of individual investors into an asset which is now rarer than gold, after the halving it recently experienced.
To mitigate the enormous volatility of bitcoin, managers recommend not exceeding 3% exposure in investors' portfolios, which, being a hedge fund, should be considered suitable for this type of vehicle, in accordance with regulations. However, the returns pay off in the long run. According to their calculations, it is enough to incorporate 1% of crypto-assets into a conservative portfolio so that the annualized return obtained can almost double: from 2.86% to 5.04% and with less than a percentage point of volatility. in addition.
For the management of the fund, which, along with that of Renta 4, is one of the few fund-based options available to investors to access cryptoassets, its managers use listed products, which work similarly to a ETFs, from different providers, who in some cases have launched specific products at their request. Bitcoin represents 62% of the portfolio, ethereum 24%, solana 4%, binance 2.5% and other smaller crypto-assets the rest, such as polygon, arbitrum or polkadot.
The managers, also responsible for the DIP – Paradigma Conservative Multi Asset fund, use indicators from companies such as Glassnode to modulate exposure to cryptocurrencies, while there are more than 13,000 assets of this type, of which more than 99% are called to close.