Bitcoin hit a $100K milestone for the first time in early December and failed to maintain the momentum later on, probably due to profit booking. But its sluggishness didn’t last long. The largest cryptocurrency surged back to the $100,000 level late last week and touched $106,000 mark on Dec. 16, 2024.
While optimism for a cryptocurrency-friendly regulatory environment under President-elect Donald Trump is now baked in the current valuation, new tailwinds have arrived here to fan a further Bitcoin rally.
The Fed Chair Powell recently labeled Bitcoin as “virtual and digital gold,” while billionaire investor Ray Dalio advised people to invest in hard assets like gold and Bitcoin to avoid the effect of a looming debt crisis.
These very comments probably helped Bitcoin swiftly surge above the $100,000-mark, as FOMO gripped Wall Street with respect to Bitcoin investing. Let’s delve a little deeper.
Fed Chair Powell’s Perspective on Bitcoin
Federal Reserve Chair Jerome Powell recently addressed Bitcoin's role in the financial ecosystem during the DealBook Summit, as quoted on Yahoo Finance. He equated the cryptocurrency to gold rather than the U.S. dollar, stating, “People use Bitcoin as a speculative asset. It’s like gold—it’s just virtual and digital .” However,Powell dismissed the notion that Bitcoin threatens the strength of the U.S. dollar.
Interestingly, BlackRock’sspot Bitcoin-based exchange-traded fund (ETF) iShares Bitcoin Trust IBIT (having launched earlier this year) now has more than $50 billion in net assets. That’s more than BlackRock’s iShares Gold Trust IAU ETF, which made its debut in 2005 and has $34 billion in assets.
Ray Dalio’s Debt Crisis Warning
Meanwhile, billionaire investor Ray Dalio raised concerns about U.S. debt, which topped $34 trillion in early 2024 (probably due to pandemic-era stimulus spending), as quoted on Forbes. He warned of an impending “debt crisis” that could erode the value of the U.S. dollar.
Dalio — the founder of the world's largest hedge fund Bridgewater Associates — thus encouraged shifting investments away from debt-based assets like bonds in favor of “hard money” assets such as gold and Bitcoin .
What Should be Your Stance?
While things look rosy for the cryptocurrency, its high level of volatility cannot be ignored. BlackRock, the world’s largest asset manager, suggested that no more than 2% of one’s portfolio should be invested in the Bitcoin, as quoted on Fortune.
The asset manager said that this 2% weighting causes a similar amount of risk as the Magnificent Seven — a group of mega-cap tech stocks — in a typical portfolio consisting of 60% stocks and 40% bonds.
Why Bitcoin ETFs Are Better Than Bitcoin Itself
Instead of Bitcoin, you can also invest in Bitcoin ETFs that have been seeing immense success this year. These are Grayscale Bitcoin Trust ETF GBTC, IBIT, Fidelity Wise Origin Bitcoin Trust FBTC, ARK 21Shares Bitcoin ETF ARKB and Bitwise Bitcoin ETF BITB.
Holding Bitcoin-based ETFs instead of Bitcoin itself offers several benefits. Bitcoin ETFs are traded on regulated stock exchanges. With an ETF, investors can avoid risks like wallet hacking or losing private keys. There is ease of access to the ETFs.
Investors don’t need to understand blockchain technology, private keys, or the nitty-gritty of different Bitcoin wallets. Buying and selling an ETF is simpler compared to exploring cryptocurrency exchanges. ETFs are often structured to be more tax-efficient than directly holding Bitcoin.
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iShares Gold Trust (IAU): ETF Research Reports
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