Here’s Why Bitcoin’s Reputation as a Volatile Asset Could Begin to Erode

Bitcoin’s reputation as a volatile asset may be transforming, as indicated by insights from Matt Hougan, chief investment officer at Bitwise Asset Management. Over the past decade, the cryptocurrency’s notorious price fluctuations have notably subsided.

Hougan explained, “What’s driving the bitcoin market right now is a simple demand-supply imbalance. We have this huge new source of demand from these ETFs, and we have a supply that’s inelastic,” during an interview on CNBC’s “ETF Edge.”

Bitcoin's Reputation as a Volatile Asset Could Begin to Erode
ProShares’ Short Bitcoin Strategy ETF experiences a 42% decline, showcasing alternative investment strategies. (Credits: iStock)

The introduction of bitcoin exchange-traded funds (ETFs) on January 11 marked a significant milestone. Since then, the asset has surged by over 50%, reaching a record high of nearly $74,000 this week.

However, Hougan acknowledges that Bitcoin’s volatility might not appeal to everyone. “It moves around a lot. Some people find it difficult to understand,” he stated.

While Bitwise remains optimistic about Bitcoin’s future growth, ProShares has taken a different approach with its Short Bitcoin Strategy ETF. The fund, aimed at profiting from bitcoin’s declines, has experienced a 42% decrease this year and a staggering 70% drop over the past year.

Simeon Hyman, global investment strategist at ProShares, emphasized their commitment despite challenges, saying, “To quote Mark Twain, ‘The reports of our death have been quite exaggerated.’ We’re happy to be here and think we’re serving as a key alternative.”

Bitcoin's Reputation as a Volatile Asset Could Begin to Erode
Introduction of ETFs boosts demand, propelling bitcoin’s surge by over 50%. (Credits: iStock)

Hyman pointed out that bitcoin’s resilience predates the emergence of spot bitcoin ETFs, highlighting its historical strength.

“This is the month of the anniversary of the collapse of crypto-linked financial institutions. Last year, bitcoin was going up then, too. I think longer-term folks are starting to come in for asset allocation and diversification purposes,” he explained.

ProShares also manages a long-bitcoin ETF, the ProShares Bitcoin Strategy ETF, which has seen a 55% increase since January 1 and a remarkable 111% gain over the past year.

As of Friday evening, bitcoin has surged by 180% over the past 12 months.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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