How Does Bitcoin Fit In An Investment Portfolio?

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Bitcoin is a digital currency that’s evolved into a digital store of value with some characteristics of gold.The important issue for investors is how it’s valued, which depends on a variety of factors...

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I’m not sure people actually should be listening to me about bitcoin. Sadly, I’ve missed out on all of this, so I don’t know if you want to ask me any questions about it. Jodi Phillips: That’s why we have guests, but- Brian Levitt: That’s right. We have guests- Jodi Phillips: But it sounds like you have a little FOMO. Brian Levitt: Yeah. Who wouldn’t have FOMO over this, right?Brian Levitt: Yeah. And what about the initial rationale for it, whether think back to ‘08, whether that was failing banks or concerns about unsustainable government debt, rampant inflation. 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The climb has followed the approval of spot bitcoin exchange-traded products (ETPs), which opened up the cryptocurrency for investors of all stripes. Easier access may not be the only reason for the rising price. What does it even mean to put a price on this asset? And how does such a volatile asset fit into a broader portfolio? Ashley Oerth, Associate Global Market Strategist at Invesco, and Ken Blay, Head of Research for Invesco’s Global Thought Leadership team, joined the Greater Possibilities podcast to talk about bitcoin and its potential place in a portfolio alongside stocks and bonds. Transcript Brian Levitt: Welcome to the Greater Possibilities Podcast from Invesco, where we put concerns into context and the opportunities into focus. I’m Brian Levitt. Jodi Phillips: And I’m Jodi Phillips. And on the show today are Ashley Oerth from Invesco’s Global Market Strategy Office, and Ken Blay, Head of Research for the Global Thought Leadership team. And Brian, we’ve brought them on today to talk about bitcoin. Brian Levitt: Good. I get a lot of questions about bitcoin, certainly with the moves that we’ve had again more recently. Jodi Phillips: All right. You get a lot of questions. Do you have any answers when you get those questions? Brian Levitt: Well, maybe some. I’m not sure people actually should be listening to me about bitcoin. Sadly, I’ve missed out on all of this, so I don’t know if you want to ask me any questions about it. Jodi Phillips: That’s why we have guests, but- Brian Levitt: That’s right. We have guests- Jodi Phillips: But it sounds like you have a little FOMO. Brian Levitt: Yeah. Who wouldn’t have FOMO over this, right? What a move in price. Jodi Phillips: Well, so you say you’ve missed out, but why? Why have you missed out? What’s behind that? Brian Levitt: Well, I guess I’m just still learning, waiting to learn more, and maybe I’ve waited too long, but to learn more about its purpose, how it fits into a portfolio. And Jodi, you co-host this with me. So, we once had a wise man on this podcast tell us, sometimes things just have to go up without you. Jodi Phillips: I remember that. Well, look, we need to learn, and we’ve got the right guests to help us learn. I would also like to hear more about just sort how to think about bitcoin. It’s the same questions. Is it a currency? Is it a commodity? Brian Levitt: Yeah. And what about the initial rationale for it, whether think back to ‘08, whether that was failing banks or concerns about unsustainable government debt, rampant inflation. Either those things haven’t come to pass or the market sort of ignored them otherwise. So, has the rationale for bitcoin evolved and to what? Jodi Phillips: Right. And for investors who own it or want to own it, how should they think about allocating it in their portfolio? How does it fit alongside the stocks and the bonds that they already have, and how can that all potentially fit together for them? So fortunately, Ashley and Ken are on the podcast today to answer those questions and more. Brian Levitt: Yeah. And they’ve both written extensively on the topic, so I couldn’t think of two better people to bring on to speak to. Jodi Phillips: Well now’s the time to bring them on. Welcome, Ashley and Ken. Ken Blay: Hey, thank you for having us. Ashley Oerth: Thanks so much, Brian and Jodi. Great to be here. Brian Levitt: Yeah, great to have you. Ashley, I’ll start with you. What’s the purpose of bitcoin? What’s it for? Ashley Oerth: Yeah, I think that’s a great place to start. I think also this is probably the question that has most frustrated people over the last decade plus because there’s a lot of questions still over what exactly it’s supposed to be. But it seems like that hasn’t really mattered. So, let’s go back to the start. So really bitcoin, it was intended to be a sort of digital means of transacting value really without the need for intermediaries. You referenced before the global financial crisis. This is when bitcoin was really born, and the idea was to be able to sort of evade the traditional financial system, to not really have to use banks or other institutions, but instead to be able to transact value in a way that was secure, but without the need for any kind of intermediaries. That said, most would really say it’s failed as a digital currency. Instead, it’s really evolved to be a sort of digital store of value, similar in many ways to gold, which is drawing these sorts of comparisons of bitcoin being “digital gold.” The problem with bitcoin really is that it doesn’t enjoy the same history that gold does. So, I think that this sort of comparison, it’s pretty difficult, at least at this stage. For the time being, bitcoin, it’s attracting a lot of eyeballs and investor dollars really because it’s both supply-limited and highly secure. And it has these really tempting price cycles, which we’ll get into, I’m sure. It’s in this sort of self-fulfilling cycle for the time being. Brian Levitt: If it has tempting price cycles, can it be a store of value? Ashley Oerth: That’s exactly the point I love to come back to, which is that if it is supposed to be the store of value, a store of value should be relatively stable. But it’s the opposite of that. We have seen volatility come down. Sure. And the sort of history of bitcoin shows it to be something that can go as low as 80% to 90% below its previous highs, but we still see this narrative be pervasive. So, I think that if the narrative lasts that it sort of becomes self-fulfilling in some ways. So, I guess it’s just a matter of time until we get there. But for the time being, there’s plenty of reason to be skeptical. Right? Ken Blay: Well, and when you say about volatility coming down, that’s a relative comment. So, the volatility was at 150% annually. Now it’s somewhere between 60% and 80% annually, which is still huge. And if I’m going to go buy eggs with my bitcoin, I need to know how much bitcoin I need to take. That’s part of the problem. Brian Levitt: It’s like being in one of those inflationary countries in the 1930s where you didn’t know what the price of a beer was going to be the next time it came around. Ken Blay: Yup. Jodi Phillips: So Ashley, we’re talking specifically about bitcoin here and we’re going to continue to do that, but I do want to ask just at the outset, obviously, the name recognition of bitcoin, but how else should we differentiate bitcoin versus so many of those other crypto coins that are out there? Ashley Oerth: Sure. So, I would say the sort of critical differentiator for bitcoin is the fact that it’s got this sort of supply limitation built into it. And as we’re discussing already, we’re focusing on bitcoin, but we could be discussing other cryptocurrencies as well. But bitcoin has got this incredible brand recognition, and I think that’s helped it stay at the top of the crypto charts. Bitcoin, it was really the first cryptocurrency, and it sort of stands as representative of the entirety of the crypto space. Pretty much everyone, I would argue, has at least heard of bitcoin, and media coverage tends to really paint bitcoin as sort of representative of this space. I also think that it’s relatively simple compared to other cryptos — its design, its language around it. Sure, it has a hurdle to it to really wrap your head around how it works. But compared to other cryptocurrencies, I would actually argue it’s quite simple and straightforward. And I think that it also requires less knowledge of the crypto ecosystem in general to really appreciate what it’s about. It’s a much more refined idea, I think, than a lot of other cryptos out there. So, in a space that’s very young, I think bitcoin is this sort of style work crypto. And this mixed with the fact again that there’s this limited supply that can only ever be 21 million bitcoins, I think it’s set up bitcoin for this relative success we’ve seen. Brian Levitt: Jodi, I had a friend of mine who was telling me that they were trading 82 cryptos or something, and I was trying to figure out how many I could name. I think I got to Ethereum (ETH-USD), Dogecoin (DOGE-USD) and I got stuck. Jodi Phillips: You got me beat already. Brian Levitt: I beat you already. Jodi Phillips: Oh yeah, for sure. Brian Levitt: Yeah, yeah. So, you’re not a big Dogecoin trader, Jodi? Jodi Phillips: No, no. I have to admit that I am not. I am not. At least not yet. We’ll see where I’m at the end of this podcast though. Brian Levitt: Ken, I love the research that you’ve done around how it fits into a portfolio. And what I wondered when you were thinking about that, did it even matter to you, these conversations around purpose, or were you just thinking about risk-return profile and how an investor may want to think about it in a portfolio? Ken Blay: Yeah, great. That’s a great question, Brian. We authored a piece and two of my other co-authors are these bitcoin fanatics. They love bitcoin. Everybody should own bitcoin. I tend to be the bitcoin skeptic. And so, it was a really nice balance because they pushed on one way and I pushed on the other way in terms of being skeptical about things. And really what it led us is to be very objective about how you look at this thing. And it’s interesting, we’ve submitted the paper for publication. We’ve got some comments back from the referee and one of the things that came back, was you guys didn’t mention whether it was a commodity, was a currency or it was a collectible or anything like that. Brian Levitt: Wait. Was I that referee? Ken Blay: No. I don’t know who it was. But it’s funny that I went back, and I said, “Let me look at this.” And so there’s this guy named Aswath Damodaran from New York University. In 2017, he said, “Well, you might consider one of the paths that bitcoin can take is that it can be viewed as gold for millennials.” More recently, he basically expressed that bitcoin is a currency that nobody uses and a collectible that doesn’t behave like a collectible. Alright, so we’ve got all the three words that we need to get in there, but we’ve got no more clarity as to what bitcoin actually is. And so, my point to the referee and my point in terms of how we approach the research was in fact to say, “Look, let’s not get into those things. Let’s look at the things that we can understand or what we do know about bitcoin, and that’s where we are.” The first part of our research was to really understand bitcoin prices. How has it moved historically? What’s changed? And in doing that research, what we found is that, say the period prior to 2014, was this real crazy period went from bitcoin inception to 2014. There was some just really weird returns, really high returns, but really weird risky returns. The period afterwards tends to be a lot more normal. So, from 2014 to 2023 where we did our research, that tends to be a lot more normal. And while it is normal, there were some huge price swings. So, when we look at the returns, we looked at rolling one-year periods, so how much money you would’ve made in one year. And we see several instances of returns of greater than a thousand percent and a non-trivial amount of one-year periods that exceeded a hundred percent return. This is amazing stuff for anybody that’s looking at this. But then we also saw - Jodi Phillips: It’s the beginning of Brian’s FOMO. That’s where Brian’s FOMO started for sure - a thousand percent. Brian Levitt: To be clear, my FOMO started in middle school. Jodi Phillips: Okay. Alright. Well beyond the scope of our experts here today. Sorry. Ken Blay: So when we look at the returns, there’s also four instances where returns like one-year periods fell before 30%. And then there’s three instances where you have one-year year returns below negative 70% or greater. And those things, the most recent one started in early 2021 and lasted to about the middle of 2022. Jodi Phillips: So Ken, I’m curious then when you think, I mean just all of those different numbers and price swings that you’re talking about, how do you even begin to think about allocating to bitcoin? Where do you start when you try to think about how could this potentially fit with my stock allocation, my bond allocation, and then, how do I even think about rebalancing to make sure all of these swings aren’t just throwing everything out of proportion all the time? Ken Blay: Well, my starting point was to treat bitcoin as a speculative asset. And if for no other reason is that a lot of things that we just discussed, that the characteristics of bitcoin are indeterminate. What that means is that people have a hard time explaining it. Correlations are incredibly weird over the time. So, there’s a very limited timeframe for us to analyze bitcoin. The problem with that timeframe is that there was a global pandemic, there was massive government fiscal and policy intervention across the globe. We saw the greatest increase in interest rates in over 20 years here in the US. The most significant increase in inflation in over 40 years. And we also had instances of stock bond correlations that were among the highest and the lowest, historically. So, you have this period, yeah, I’ve got 10 years of data, a lot of stuff is going on, so there’s a lot of noise. But then you couple this with the fact that bitcoin was maturing at that time and all the infrastructure behind bitcoin and that allowed the trading of bitcoin, that was all brand new as well. So, you have this thing that’s evolving around all of this noise. And so, it’s really hard to make any inferences about how bitcoin is going to act relative to stocks or to bonds or all of that, for me, has to go out the door. So, you have to really think about this as a speculative asset. And the two key things that you need to think about when you do that is first your initial allocation. That’s the first step in mitigating risk is, how much would I be willing to risk without impairing my ability to meet my financial objectives? That’s for the individual investor to determine. And then how do I manage risk on an ongoing basis? And that’s where your point about rebalancing is actually a prescient one because it’s really important to rebalance, especially for something that bitcoin that can go up a thousand percent or whatever. It could become a huge part of your portfolio. And so you need to mitigate that. You need to manage that part of the risk. So those are the starting points there. You treat it as a speculative asset, and you figure out your allocation size. And then you start looking at, alright, what are the benefits, and what are the risk implications? And our research is essentially that. We looked at what are the benefits from adding bitcoin to my portfolio. And we assume that you start off like any investor, like I’m a moderate investor, you have risk preferences as a moderate investor. As I add bitcoin, one of the things that happens, bitcoin, it doesn’t take a lot of bitcoin to add a lot of risk. That said, it doesn’t take a lot of bitcoin to add a lot of return either. Brian Levitt: It goes a long way. Ken Blay: And so, you have to, all right, well I know that there’s a good part of this, but there’s also the bad part, the risk part. And so, all we did with the research is just say, as I extend myself in terms of accepting more risk, at what point should I stop? At what point do I stop getting incremental good stuff? And that’s essentially what we did. We called it a benefit-to-risk metric. And we said, alright, at the point that I stop, that the incremental risks exceed the incremental benefits so at the point that I get more risk than I get good stuff, that’s where I should stop. That’s the maximum. I’m not saying that that’s the optimal point. That’s the maximum point because you still have risk all the way before that point. Brian Levitt: And I love that approach and I do want to hear more about, a little bit more on detail in terms of what your allocations were with regards to that. But I want to bring Ashley back into the conversation for a moment. Ashley, when you think about the moves in bitcoin over the last period that Ken was talking about that had a lot of tumult, a lot of strange things, we saw it go to $65,000 a coin, back down to $16,000 a coin, sat there for a while. Now it looks like it is getting close to $90,000 a coin. Is there anything that you could take away from those movements and identify this is why that happened? Is it about easy monetary policy? Is it about inflation? Is there anything that you could latch onto in looking at those price moves over the last few years? Ashley Oerth: I think the answer to that is yes. I think that there’s quite a lot to unpack for exactly what drives bitcoin prices. Since bitcoin has been around, there’s been this desire to try to model it or explain exactly what’s going on with its price and what it should be responding to. And the truth of it is that valuing bitcoin, it’s immensely difficult. It’s essentially this sort of commodity currency that benefits from network effects. So, for example, in some early models, this is when bitcoin was really first having its run back in 2014, people sought to really model it as something that would respond to network effects. And then we try to measure network growth and use that as a proxy for what should drive price momentum. But of course, as the ecosystem around bitcoin has grown, this approach, it really broke down. It doesn’t work anymore. And I think the critical takeaway here is that you cannot really value bitcoin. You can try to price it, you could try to build a framework around its likely drivers. And so, we do have some ideas, and you highlighted a few of them, of what can be a driver here. But I think what it comes back to is what are the supply and demand factors underlying bitcoin itself, and then broadening away from that, what is the sort of financial backdrop? What are financial conditions telling us, and how does that affect the opportunity cost that’s wrapped up in holding bitcoin? Brian Levitt: Can I take a quick stab at what I think we just said and how the markets performed? It seemed to me that a lot of the run-up was ahead of the inflationary environment that we had. Then a lot of the rundown was ahead of the policy tightening that we had. And then more recently, expectations for easing again. I think of gold, I look at it from a real yield perspective. What real yield can I get in treasuries? Is gold enticing or not? And as that widens and narrows, it tends to have some impact on whether gold is attractive or not. Is it similar with bitcoin? Ashley Oerth: It is a similar kind of idea. I think that what’s interesting about bitcoin is that it’s sort of framed as this, as I’ve heard it described, marginal user of excess liquidity. Or in other words, when you have, for example, large scale money supply growth, that bitcoin is something that can benefit from that. And so we saw that dynamic play out in the post-pandemic environment where bitcoin really surged several times over. And we’ve seen the reverse of that as well, that as money supply has come in, or money supply growth I should say has come in, that that’s sort of pulled down bitcoin prices. And as you mentioned, there’s this sort of opportunity cost angle as well that if real yields are climbing, if the Fed is hiking rates, if long rates are rising, that this should penalize bitcoin because it’s a zero-yielding asset. And we’ve seen that play out as well. Similar again to what you just described, this kind of gold equivalency. So there are those sorts of factors that we can point to as being, again, a framework for how bitcoin can be priced. But in terms of a long-term valuation, it’s quite difficult to really ascribe what is that long-term driver. That’s where I come back to demand. The price action we’ve seen since, I would argue, the fall of last year has been all about this spot bitcoin ETF news from the SEC. And we saw the ETFs launched in early January, and this has really been a very positive demand shock that’s helped send bitcoin prices to new highs, and we continue to see that play out. It’s, I would argue, not done yet. Jodi Phillips: It seems a little ironic, right? I mean, is there a certain amount of irony there that people said crypto was going to dis-intermediate the financial sector, but now we’ve got ETFs allowing you to track spot bitcoin prices. So, just that evolution and how people are thinking about it and how they’re able to access it. Definitely adds another dimension, doesn’t it? Ashley Oerth: It does, and I don’t think this irony is really lost on the crypto community. But I think that for the average investor, this sort of packaging, it’s important. Cryptos, otherwise, they’re quite challenging to access in a way that is secure, reliable, compliant, and to do this in a way that’s cost-effective. So, cryptos wrapped in an ETF, they really offer a meaningfully easier way for the average investor, the average client, who wants bitcoin exposure to be able to access this space. Whereas those sorts of previous offerings, they required more paperwork and oftentimes partnering with crypto-specialized firms and services that really offered a host of complications and added costs. So, I think that this wrapper, this packaging, of the ETF is attractive because it’s more familiar and it’s easier to work with at the end of the day. Jodi Phillips: Right. Brian has fear of missing out. I would have fear of misplacing my wallet password or whatever I need to even access it. Right? One more thing to remember. Brian Levitt: Fear of misplacing my wallet- Jodi Phillips: Yeah, it’s not- Brian Levitt: I’m going to try it. Jodi Phillips: No, don’t. Brian Levitt: Ken, you wanted to jump in? Ken Blay: Oh yeah, I was going to say with regard to bitcoin prices, I think the one thing that we do know about bitcoin prices is that the price of bitcoin is ultimately what somebody else is willing to pay for that. Now, ultimately, that’s going to depend on what’s happening to bitcoin and what people believe. And that’s where I think the speculative nature of bitcoin comes in because right now everybody believes that it should go up. There is demand driven by all of these ETFs. The other thing that I’ll add there is that there’s two ways of viewing the financial system or these asset managers getting involved with bitcoin. One is a fairly cynical view, and another one aligns much more closely with what Ashley was saying. The cynical view is that the asset managers weren’t getting paid when bitcoin was being traded outside of conventional pathways. Okay. That’s a very cynical view. But to Ashley’s point, one of the things that asset managers have done throughout history is provided access to difficult-to-access assets. So, the whole notion of pooling investments, that was asset managers actually started those things and it made life a lot easier for investors to get access to diversified pools of assets. Now, the bitcoin ETF is not that, but it does simplify access to getting the bitcoin, getting access to bitcoin. Brian Levitt: Absolutely. And Ken, as we come to the end of this, I’d love to hear some numbers around allocations, like what percentages you put around this. You had talked about that benefit to risk and it just... You got to a point where you kind of maxed out. What did those numbers look like? Give it to me if I’m a hundred percent in equities versus if I’m more of a moderate fifty-fifty portfolio investor. Ken Blay: Well, I’ll give you two sets of numbers. So, when the research that we’ve done, we looked at historical returns of bitcoin. So, one of the things that you do is [you say] bitcoin does what it did in the past. Because that’s the one side of it is the return benefit. Okay, what did it do? Generally, what you’re looking at, in more conservative portfolios, you’re looking at about 1% to 3% allocation, or actually 1% to 2% allocation. That’s for conservative portfolios. For more aggressive portfolios, you’re looking at somewhere from 3% to 6% allocation. So, that’s assuming that bitcoin does what it did in the past. If you look at and say, “Well, bitcoin isn’t going to do that. Maybe let’s just say that it does half of what it did in the past.” That’s just a rough... I mean, like I said, there’s no way of knowing what bitcoin is going to do, but let’s just say it did half just, still a pretty big number. There, you’re looking at about 1% allocations for conservative portfolios and somewhere between two and five. These higher numbers are obviously the 100% stock portfolios. Anytime you start adding the bonds, you tend to come down pretty quickly. So, those are kind of rough estimates of what the research has pointed to. That said, we pointed out what we’re saying here is the maximum. The maximum exposure is… after this point, you’re taking on more risk than the benefit you’re getting. I say that on the more aggressive points, you can go up to... The research points to 5% allocations. That’s all going to depend on the investor. The investor has to decide, am I willing to take on the additional risk of having that bitcoin in the portfolio? If you’re not, well bring it back a little bit. But if you are, okay, maybe 5% should be a maximum for the hundred percent stock portfolio. And so we are not suggesting that these are optimal allocations. We’re just saying this is the point where you take on more risk than benefit. Brian Levitt: So are we doing two or five, Jodi? Jodi Phillips: I don’t know. Are you more conservative or aggressive? Brian Levitt: I’m usually more aggressive. I’ve got time. Ashley, any final comments from you? Ashley Oerth: Look, I think that the bitcoin outlook from here, I think that we’re at this moment right now where everybody’s talking about this thing. That prices are high. And we’re doing this all in an environment in which rates are still elevated, that we’re supposed to be living through this period that I think that, from the financial backdrop, should be penalizing bitcoin prices, but we’re actually seeing quite the opposite. So, I think that the sort of peak in sentiment is something to watch. And I feel like what I’m left wondering going forward is what is the next big thing. What is the next big driver for crypto prices? Now that we’ve reached this point where we have spot bitcoin ETFs, what is the sort of next moment that we’re looking to on the horizon to really help send bitcoin on another one of these price cycles? So that’s really where I think it’s sort of a thoughtful note to leave this conversation because I think that there’s so much to unpack for what is happening in the crypto world, and I think that we’re sort of in the big leagues today. That crypto prices are elevated, that we’re talking about putting it in a portfolio. I think it’s an exciting time to be considering this space. So, I’m sort of thinking what comes next? Jodi Phillips: What comes next? Let’s leave it there. Right, Brian? Brian Levitt: Let’s leave it there. Jodi Phillips: Leave it on a cliffhanger. Brian Levitt: Well, thank you both so much for joining. Jodi Phillips: Yes. Ken Blay: You’re very welcome. Thank you for having us. Ashley Oerth: Thank you so much. It was great. Jodi Phillips: It was great to have you. And Brian, where can listeners find more commentary from you? Brian Levitt: Well, thanks Jodi. Visit Invesco.com/BrianLevitt to read my latest commentaries. And of course you could follow me on LinkedIn and on X @BrianLevitt. Thanks, Jodi. This was fun. Jodi Phillips: Thanks for listening. Important information You've been listening to Invesco's Greater Possibilities Podcast. The opinions expressed are those of the speakers, are based on current market conditions as of April 11, 2024, and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. Invesco is not affiliated with any of the companies or individuals mentioned herein. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions. Should this contain any forward looking statements, understand they are not guarantees of future results. They involve risks, uncertainties, and assumptions. There can be no assurance that actual results will not differ materially from expectations. All investing involves risk, including the risk of loss. Past performance is not a guarantee of future results. Diversification does not guarantee a profit or eliminate the risk of loss. An investment cannot be made directly in an index. All data provided by Invesco unless otherwise noted. Bitcoins are considered a highly speculative investment due to their lack of guaranteed value and limited track record. Because of their digital nature, they pose risk from hackers, malware, fraud, and operational glitches. Bitcoins are not legal tender and are operated by a decentralized authority, unlike government-issued currencies. Bitcoin exchanges and Bitcoin accounts are not backed or insured by any type of federal or government program or bank. References to the historical performance and volatility of bitcoin sourced from Bloomberg as of March 31, 2024. Discussions about Ken Blay’s research and conclusions based on Invesco analysis of bitcoin prices from Dec. 31, 2014, to Dec. 31, 2023. The limitation of the supply of bitcoin to 21 million bitcoins was expressed in the 2008 paper written by Satoshi Nakamoto titled Bitcoin: A Peer to Peer Electronic Payment System. References to the greatest increase in interest rates in over 20 years sourced from Bloomberg, based on the 10-year US Treasury rate. The most significant increase in inflation in over 40 years sourced from the US Bureau of Labor Statistics, based on the US Consumer Price Index, which measures changes in consumer prices, as of March 31, 2024. References to stock/bond correlations sourced from Bloomberg based on the correlations of the S&P 500 Index and the Bloomberg US Aggregate Bond Index. The S&P 500® Index is an unmanaged index considered representative of the US stock market. The Bloomberg US Aggregate Bond Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market. Fluctuations in the price of gold and precious metals may affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic conditions of countries where companies in the gold and precious metals sector are located may have a direct effect on the price of gold and precious metals. The Greater Possibilities podcast is brought to you by Invesco Distributors, Inc. Additional disclosure Important information NA3620424 Image: Andriy Onufriyenko / Getty The Fund is speculative and involves a high degree of risk. An investor may lose all or substantially all of an investment in the Fund. The Fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder. Shares in the Fund are not FDIC insured, may lose value and have no bank guarantee. This material must be accompanied or preceded by a prospectus. Please read the prospectus carefully before investing. The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind. Bitcoin has historically exhibited high price volatility relative to more traditional asset classes, which may be due to speculation regarding potential future appreciation in value. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero. The further development and acceptance of the Bitcoin network, which is part of a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate. The slowing, stopping or reversing of the development or acceptance of the network may adversely affect the price of bitcoin and therefore an investment in the Shares. Currently, there is relatively limited use of bitcoin in the retail and commercial marketplace in comparison to relatively extensive use as a store of value, contributing to price volatility that could adversely affect an investment in the Shares. Regulatory changes or actions may alter the nature of an investment in bitcoin or restrict the use of bitcoin or the operations of the Bitcoin network or venues on which bitcoin trades. For example, it may become difficult or illegal to acquire, hold, sell or use bitcoin in one or more countries, which could adversely impact the price of bitcoin. The Trust’s returns will not match the performance of bitcoin because the Trust incurs the Sponsor Fee and may incur other expenses. The Market Price of shares may reflect a discount or premium to NAV. The price of bitcoin may be impacted by the behaviour of a small number of influential individuals or companies. Bitcoin faces scaling obstacles that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective. Miners could act in collusion to raise transaction fees, which may affect the usage of the Bitcoin network. Competition from central bank digital currencies (“CDBCs”) and other digital assets could adversely affect the value of bitcoin and other digital assets. Prices of bitcoin may be affected due to stablecoins, the activities of stablecoin users and their regulatory treatment. The open-source structure of the Bitcoin network protocol means that certain core developers and other contributors may not be directly compensated for their contributions in maintaining and developing the Bitcoin network protocol. A failure to properly monitor and upgrade the Bitcoin network protocol could damage the network. Lack of clarity in the corporate governance of bitcoin may lead to ineffective decision-making that slow development or prevents the Bitcoin network from overcoming important obstacles. If the award of new bitcoin for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may reduce or cease processing power to solve blocks which could lead to confirmations on the Bitcoin blockchain being temporarily slowed. Significant delays in transaction confirmations could result in a loss of confidence in the Bitcoin network, which could adversely affect an investment in the Shares. A temporary or permanent “fork” in the blockchain network could adversely affect an investment in the Shares. Flaws in the source code of Bitcoin, or flaws in the underlying cryptography, could leave the Bitcoin network vulnerable to a multitude of attack vectors. A disruption of the internet may affect the use of bitcoin and subsequently the value of the Shares. Risks of over or under regulation in the digital asset ecosystem could stifle innovation, which could adversely impact the value of the Shares. Shareholders do not have the protections associated with ownership of Shares in an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) or the protections afforded by the Commodity Exchange Act (the “CEA”). Future regulations may require the Trust and the Sponsor to become registered, which may cause the Trust to liquidate. The tax treatment of bitcoin and other digital assets is uncertain and may be adverse, which could adversely affect the value of an investment in the Shares. Intellectual property rights claims may adversely affect the operation of the Bitcoin network. The venues through which bitcoin trades are relatively new and may be more exposed to operations problems or failure than trading venues for other assets. Ownership of bitcoin is pseudonymous, and the supply of accessible bitcoin is unknown. Entities with substantial holdings in bitcoin may engage in large-scale sales or distributions, either on nonmarket terms or in the ordinary course, which could result in a reduction in the price of bitcoin. The Trust is subject to the risks due to its concentration in a single asset. Bitcoin spot trading venues are not subject to the same regulatory oversight as traditional equity exchanges. Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Trust.  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