Fidelity’s Bitcoin Announcement

Last week Fidelity announced they would soon offer employees a way to invest in Bitcoin through dedicated “digital assets accounts.”

We see two trends here:

1) “Next-gen wealth.”

People between the age of 20 and 50 – don’t invest like their parents and their grandparents. They have longer investment horizons, a greater appetite for risk, and want solid returns. 

Bitcoin has been around for more than a decade, NFTs are mainstream and next-gen investors are educated on the possibility of a more decentralized, token-based economy. It’s inevitable that in order to grow the investment companies of our parents’ generations will incorporate new asset classes into traditional investment vehicles.

2) Creating diversified exposure to crypto and web3 technology should be considered a key part of an investor’s portfolio construction.

Fidelity is likely placing an early emphasis on Bitcoin because of its first-mover status – bitcoin is considered to be the gold standard of cryptocurrency. 

With a larger market cap than Meta and AT&T combined, bitcoin shouldn’t be ignored. But making a single coin bet is limiting. There are potentially better choices… it is impossible to say which one is long-term. Ethereum greatly outpaced bitcoin in 2021, returning 399.2% compared to Bitcoin’s 59.8%. 

As a Layer 1 application, bitcoin is basically a dinosaur. Layer 2 applications, particularly in DeFi, have the possibility to disintermediate a lot of areas of traditional banking – one could argue they already are. 

In any case, instead of deciding what percentage of their 401K they move into a specific coin exclusively, investors are better off allocating a portion of their portfolio to both a basket of cryptocurrencies and to the companies building and innovating on the underlying technologies behind crypto and web3 more broadly. 

Investment in funds in this space would both place bets on the future of the crypto industry while addressing even the SEC’s concerns on investing in the space- given that funds operate within a regulatory framework defined by the SEC.