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Monday, September 9, 2019

Should You Diversify Your Portfolio With Bitcoin?


To buy bitcoin or not to buy bitcoin...that is the question.

It can be a hard question to answer and rightly so. 

The good news is that you don't have to draw a line in the sand. This is not a do or die situation (unless you make it one). You have the liberty to invest your wealth wherever you want. And, if there's anything I've learned in all my years of studying financial markets, it is that diversity is the key to riding out economic cycles. Your portfolio gains strength from diversifying your assets, especially if those assets aren't correlated with one another. 

I know the media is politicizing the recession, but this has nothing to do with Trump. This is about a global 'bow' that is about to break. All signs are pointing south, from negative interest rates to declining GDP levels. There may be those that have a vested interest in telling you otherwise, but if we use the same barometers of economic health that we've used over the past 60 years, we are due for a recession.  

For example, Fed Chairman Powell was heard across financial media last week saying that he did not think a recession was looming. Meanwhile, his own NY Fed just published the chart below suggesting otherwise. The blue represents periods of recession.

And, if a recession isn't a concern, why are you lowering rates? 

What do I think is going on?

Personally, I think central banks figured out they could make more money from negative rates than by raising the IOER. They're going for the big whale con.

It's hard to know what's going to happen for sure, but one thing is certain, a downturn is coming. The best way to guard against the inevitable downturn is to diversify your asset base. In simpler terms, you never want to put all your eggs in one basket. You certainly don't want to ban the fastest growing asset class in the world from your portfolio. 

Jeff Sprecher (pronounced “Sprecker”), the founder, chairman, and CEO of Intercontinental Exchange (ICE) is also a believer in bitcoin. And, I don't mean that in a general sense. Sprecher is a true believer; an evangelist of sorts. 

Sprecher's name may sound familiar because ICE is also the world’s second largest financial exchange by revenue. ICE also owns NYSE American, the leading platform for mid-cap companies. 

In the bitcoin community, however, Sprecher is known more so for his work as founder of Bakkt, one of the most talked about bitcoin ventures happening this year. ICE is partnering with Microsoft, Boston Consulting Group, and Starbucks to make bitcoin accessible to the world’s largest financial institutions. It gives these uber-large institutions a way to buy and take custody of bitcoin within an end-to-end regulated system approved by the CFTC and NYDFS, and it is "backed" by the reputation of ICE. The venture just went live last week.

Not surprisingly, lots of value changed hands last week as well -- $780 million BTC was moved earlier in the week followed by a $1 billion (94,505 BTC) move that made crypto headlines.

The point is, if you decide to diversify your portfolio with bitcoin you'll be in good company. The largest institutions in the world are preparing to do the same.

The revolution is digital...

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