- According to the K33 Research report, the approval of spot Bitcoin ETFs in the U.S. can simplify access to bitcoin risk and help reduce the traditional 60/40 portfolio risk by turning to digital assets.
- Meanwhile, Binance’s BNB increased by 8% in the past week to account for possible effects of consolidation. CME traders continued their upward exposure to Bitcoin last week.
- The entries of Bitcoin-based ETPs coincide with signs of interaction between the SEC and spot Bitcoin ETF applications.
The research firm, which published a report on Spot Bitcoin ETFs, argues that it can reduce portfolio risk: Research details!
Report on Spot Bitcoin ETFs and Risks
According to the latest K33 Research report, the approval of spot Bitcoin ETFs in the U.S. can simplify access to bitcoin risk and help reduce the traditional 60/40 portfolio risk by turning to digital assets. Senior Analyst Vetle Lunde and Vice President Anders Helseth stated, “We expect diversification and risk-adjusted performance to be significant marketing strategies.”
According to analysts, Bitcoin has proven itself as a powerful tool for portfolio diversification since 2020. An investor with a 1% exposure in a traditional 60/40 portfolio would have outperformed a portfolio without Bitcoin exposure by 3.16%. The traditional 60/40 portfolio is a classic investment strategy that allocates 60% to stocks and 40% to bonds.
Analysts added that despite the shocks in the crypto market in 2022, Bitcoin exposure would have increased risk-adjusted returns in a traditional portfolio this year, thanks to softened correlations and a strong rally.
Last week, a narrow window for simultaneously approving all existing spot Bitcoin ETF applications closed on Friday with the decision of the U.S. Securities and Exchange Commission (SEC) to postpone the proposed spot Bitcoin ETFs by Hashdex and Franklin. The SEC also delayed Global X’s application. Now, the focus is on the last submission after January 10.
“In this scenario, momentum in the crypto markets may slow down as we might have to wait for weeks for significant news regarding ETFs,” said Lunde and Helseth.
CME investors continue the bullish trend as Bitcoin strengthens
Despite significant volatility in the crypto markets due to important news sources such as BlackRock and Fidelity’s Ether Spot ETF applications, Ark Invest’s Cathie Wood’s comments on the possible SEC rejection of Grayscale’s spot Bitcoin application, and the settlement agreement between Binance’s Changpeng Zhao and the U.S. Department of Justice yesterday, Bitcoin has continued its consolidation with a modest 2% increase last week.
Ether fell by 2% maintaining its weakness in its one-year performance against Bitcoin, while Binance’s BNB increased by 8% in the last week to account for possible effects of consolidation. CME traders continued their upward exposure to Bitcoin last week.
As futures premiums remain above double-digit levels and open positions are at record levels, the market is witnessing a significant bullish sentiment. After eliminating the discount of ether to bitcoin in October, premiums for both have aligned at an annual rate of 18%. The basis is the difference between the spot price and the futures price of an asset.
Lunde and Helseth continued, “Current market signals indicate that CME traders want to carry their exposure to December; the contango between November and December is at a massive level of 1.69%. This is higher than the previous record high contangos in October 2021.”
The entries of Bitcoin-based ETPs coincide with signs of interaction between the SEC and spot Bitcoin ETF applications, further strengthening the approval probabilities until January 10, analysts said.
However, Lunde and Helseth noted that crypto native continuous traders are adopting a more cautious approach, reducing the likelihood of a near-term liquidity squeeze. Open positions remained at the lowest level in 18 months last week, and funding rates returned to neutral levels, indicating a more balanced market sensitivity.
