On September 13, Fidelity Digital Assets, the crypto custody arm of the U.S financial services giant Fidelity Investments. has recently conducted research showing that an increasing number of retail investors significantly turn their attention to virtual currencies as they become more familiar with Bitcoin and other cryptocurrencies via social media platforms.

Fidelity Digital Assets conducted the research report in which it interviewed top investors and crypto industry experts from companies such as Fidelity Investments, Arca, CoinShares, Octonomics, and ARK Invest.

The report says that communication and social media platforms such as YouTube, Telegram, Reddit, Tik Tok, and Twitter are driving the retail adoption of Bitcoin. They spread financial information and advice in a more rapid and viral way than traditional channels.

Meanwhile, the report has identified that institutional investors continue investing in Bitcoins. The report noted the rise of retail investors in conventional markets through the increase of platforms that make trading easier such as Robinhood, a millennial -favorite platform, whose usage significantly rose during the COVID-19 outbreak. Furthermore, the report identified a continual rise of the wallets holding less than 1 BTC, an indication of the continuing number of retail investors finding the asset a useful investment.

The reports show how social media can abnormally drive the value of cryptocurrency, especially Bitcoin.  According to data collected from the research, the behavior of institutional investors and retail investors can be different as the latter seems to purchase Bitcoins when prices decline.

Bitcoin Can Hedge Investors Against Inflation

 Based on the indication that retail and institutional investors are warming up to Bitcoins, which offer uncorrelated returns despite external conditions, Fidelity Digital Assets recommended that investors should keep 5% of their holdings in Bitcoins as alternative investment allocation.

The report highlights the use-case for Bitcoin as playing an important role as an alternative investment. Alternative investments are financial assets that do not fall under the traditional investment categories that include cash, bonds, and stocks. Bitcoin is treated as an alternative asset class, similar to gold, derivatives, private equity, or real estate.

Alternative assets have attracted investors with multi-asset portfolio investments including gold, bonds, real estate, stocks, and many other types of assets because they are more likely to retain greater value when more traditional holdings are underperforming. Holding a variety of assets helps to smoothen returns over time, at the cost of missing out on potentially higher returns if one or a few particular assets significantly outperform the market.

Bitcoin could add value to an investor’s portfolio. For example, new Bitcoin investment vehicles, including Bitcoin exchange-traded funds and futures contracts could create new opportunities for investors to invest in Bitcoin while being exposed to less volatility.

According to the research, Fidelity Digital Assets suggest investors to keep 5% of their multi-asset portfolio in Bitcoin as an alternative to get greater returns over time regardless of market conditions. It makes sense for investors to keep 1% to 5% of their assets in Bitcoin. The leading cryptocurrency presents itself as a perfect global hedge in periods of economic uncertainties. This should prompt investors to take notice as their investments in the conventional markets threaten to shrink in any way. 

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