2/15/24 Roundup: Bitcoin Infiltrates the 60/40 & Assessing Market Sentiment
Onramp Weekly Roundup
Written By Zack Morris
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And now, for the weekly roundup…
- Fidelity Adds Bitcoin to Conservative Model Portfolios in Canada
- Bitcoin Sentiment Check: A Tale of Two Super Bowls
Make Room 60/40: Fidelity Adds Bitcoin to Conservative All-In-One Canadian ETF
Fidelity, long seen as the biggest bitcoin advocate among the asset manager behemoths, stirred up conversation on X last week by adding a 1% bitcoin exposure to their Conservative All-In-One ETF offered in Canada.
The allocation comes on the heels of adding bitcoin exposure to the Growth and Balanced fund versions in January 2022. The model portfolios gain exposure to bitcoin through allocating to Fidelity’s own Advantage Bitcoin ETF launched in Canada in December 2021 (yes, spot bitcoin ETFs have been available to Canadian investors for over two years!).
Source: Fidelity
With just over $1 billion in assets across the whole lineup, the allocation itself isn’t as impactful as what it could signal for Fidelity’s U.S. mutual fund lineup, now that their U.S.-listed Fidelity Wise Origin Bitcoin ETF (ticker: FBTC) has launched.
Fidelity has two flagship U.S. mutual funds benchmarked to 60/40 with a combined $71.8 billion in AUM: the Balanced Fund (ticker: FBALX) and the Puritan Fund (ticker: FPURX).
A 2% allocation to bitcoin, as has been adopted in the 60/40 balanced fund (ticker: FBAL) in Canada (technically, 59/39/2 now), would equal $1.4 billion in bitcoin ETF flows. As of 2/12/24, FBTC had $3.8 billion in assets after about one full month of trading.
If you expand the analysis to Fidelity’s full lineup of Target Date Mutual Funds, which in total manage $468.8 billion, that equates to an additional $9.4 billion in flows into their spot bitcoin ETF.
With bitcoin’s stellar track record of superior long-term returns and low correlation to other asset classes, the body of research highlighting bitcoin’s potential contribution to maximizing risk-adjusted returns is growing.
If asset managers begin making 1-2% allocations to bitcoin in model portfolios, as Fidelity Canada has done, the asset flow implications are massive.
Bitcoin Sentiment Check: A Tale of Two Super Bowls
If you’ve been interested in bitcoin for at least a couple of years, you probably remember the myriad crypto commercials during the 2022 Super Bowl between the Rams and the Bengals.
Coinbase made headlines with a catchy minimalist ad featuring a bouncing QR code. Crypto.com hired LeBron James as a pitch man, complementing their freshly minted naming rights to the Lakers home arena. A spot for FTX featured Larry David and compared crypto to the wheel, lightbulb, and iPod.
Fresh off the 2021 bull market, the deluge of crypto ads likely made many investors uneasy as emblematic of classic late cycle behavior, perhaps even evoking memories of the E*Trade stock trading baby making his debut in 2008 just before we would enter the Global Financial Crisis.
Adding to the uneasiness was that bitcoin at the time was already trading at $42k — 39% off its November 2021 $69k top.
In stark contrast to the fanfare of 2022, this week’s Super Bowl between the Chiefs and the 49ers had nary a mention of bitcoin nor crypto, save for Jack Dorsey’s unpaid endorsement via his wardrobe choice, which wasn’t even acknowledged on the broadcast:
And yet, as the game kicked off, bitcoin was trading at $48k — 14% higher than it was during the big game two years earlier.
Opposite of the warning signs on display in early 2022, the relative lack of exuberance in today’s market — despite bitcoin being up 122% over the past year and 16% year-to-date — can be a source of comfort for investors.
The events of the past two years, including the washing out of FTX and several of their peers — and with them a significant amount of the leverage and rehypothecated “paper” bitcoin in the system — means we are building price momentum from a much more solid base in the current market.
The current lack of retail interest is further illustrated below in the chart of the week.
Chart of the Week
source: Bitcoin Archive, Google
Google web searches for keyword “bitcoin” currently index at 19, meaning the search term is 19% as popular as it was at its 2021 peak.
Quote of the Week
“Bitcoin is just an accounting ledger.”
— SEC Chairman Gary Gensler, CNBC interview on new spot bitcoin ETFs
While we’re hesitant to agree with Mr. Gensler that bitcoin is just an accounting ledger, as it is a new technology with properties that are still being discovered, he’s right that it is a ledger.
An open, permissionless, decentralized, immutable ledger, controlled and updated by network consensus — not a few politicians and central bankers — and an improvement in many ways upon all the other ledgers that came before it.
After all, bitcoin is money. And as we discuss in our new Onramp Fundamentals Series, money is just a ledger.
Market Update
as of 2/14/2024:
Source: Onramp, Koyfin. 3-yr, 5-yr figures annualized.
Assets generally shook off a hotter than expected January CPI print to close up for the week and continue a strong start to the year. Bitcoin rallied to above $50k, a level not seen since December 28th, 2021. It remains the best performing asset in YTD and 1Y periods. US large cap stocks continued their ascent, fueled by positive Q4 earnings reports and renewed enthusiasm around the AI-theme. Small caps outperformed on the week but still lag YTD. Gold and bonds fell as rates rose in reaction to the upside surprise in inflation. Oil rallied 3.78%.
Podcast of the Week
The Last Trade E037: The Pensions Have Arrived with Sam Roberts & Glenn Cameron
This episode of The Last Trade dives deep into the fundamentals of the bitcoin thesis and its impact on asset allocation, particularly focusing on the role bitcoin can play in institutional portfolios such as pension funds. The discussion features Sam Roberts & Glenn Cameron, pension investment specialists at Cartwright UK, who detail their journey of understanding bitcoin’s unique value proposition and its implications for long-term investment strategies.
Closing Note
Onramp provides bitcoin investment solutions built on top of multi-institution custody. To learn more about our products for individuals and institutions, schedule a consultation to chat with us about your situation and needs.
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Until next week,
Zack Morris