Judging solely by price charts, it's difficult to determine whether Bitcoin (BTC-USD) investors have had a "bountiful" or "bleak" year.
After a sharp decline in November, the market has found some breathing room, with hopes for a potential "Santa rally" (the typical year-end holiday uptick in stocks). While Thanksgiving dinner conversations may have shifted to market predictions, an increasing number of market participants are seriously considering the idea that "cryptocurrency is here to stay."
The extreme volatility in market sentiment—Bitcoin has fallen about 30% from recent highs—serves as a painful reminder of the cryptocurrency's inherent instability. Even as banks and crypto-friendly governments make digital currencies more accessible, price surges ultimately depend on investors' willingness to take financial risks.
And today, fewer are willing to do so.
In contrast, gold (GC=F) has surged over 60% this year. Amid political turmoil, fiat currency "devaluation," and rising debt burdens, investors have flocked to gold as a safe-haven asset. (Indeed, they have literally "struck gold" with substantial returns.)
The optimistic notion that "crypto is the new gold"—even as a rough analogy—appears shaky when comparing the two assets' performances. During key market turbulence this year, investors treated gold as a "safe harbor" while dismissing cryptocurrencies as a "bad investment habit." With the S&P 500 (^GSPC) up around 16% year-to-date, crypto has clearly missed the "risk asset rally."
Criticizing Bitcoin for its "lack of resilience" is nothing new, but the argument that "crypto is still in its early stages in the financial system" now rings hollow.
That said, a middle ground exists, and mainstream finance is positioning itself accordingly: allocating small portions to crypto allows investors to capture potential upside while minimizing downside risks.
Earlier this week, Bank of America announced it would advise Merrill Lynch, Bank of America Private Bank, and Merrill Edge clients to allocate 1%-4% of their portfolios to digital assets. This follows similar moves by major banks and asset managers, including Morgan Stanley’s Global Investment Committee, BlackRock (marking a significant shift), and Vanguard, all of whom have adopted a more favorable stance toward crypto.
The financial industry's "moderate exposure" approach to crypto may limit the "moon-shot gains" that once minted crypto millionaires. As any heist movie fan knows, sometimes you have to bet big to win big.
But in a year where a speculative asset's year-start price remains above current levels, "caution" can also be a winner—at least helping investors lose less.
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