- Analyst Geoff Kendrick suggests Bitcoin’s high Nasdaq correlation means it should be seen as a tech stock rather than just a traditional hedge.
- He developed a hypothetical “Mag 7B” index, replacing Tesla with BTC, showing about 5% higher returns and less volatility.
Standard Chartered analyst Geoff Kendrick argues that, given Bitcoin’s (BTC) high correlation with the Nasdaq, investors would be “better off” treating it as a tech stock rather than merely a hedge against volatility in traditional markets.
Kendrick argued that BTC, in the short term, may be better viewed as a tech stock than anything else:
Investors can view BTC as both a hedge against traditional finance and as part of their tech allocation. But, at least in the short term, BTC may be better viewed as a tech stock than as a hedge against TradFi issues.
Geoff Kendrick, Standard Chartered analystSo, to test his theory, Kendrick created a hypothetical “Mag 7B” index, which is essentially a variation of the traditional Magnificent 7, which includes Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla, and it just replaces Tesla with Bitcoin.
Related: Tether Looks to Teams Up with Big Four for Historic Audit Amid Stability Concerns
Higher Returns, Less Volatility?
Kendrick highlighted Bitcoin’s US$1.7T (AU$2.71T) market capitalisation, and how BTC would rank as the sixth largest asset in this modified index.
The analyst also noted that if traders had swapped Bitcoin into the index starting in 2017 —when Bitcoin had just reached an all-time high— they would have seen returns approximately 5% higher than those achieved with the traditional Mag 7.
Likewise, replacing Tesla with Bitcoin would have resulted in lower price fluctuations over the past seven years.
If that sounds incredible, well, take it from the Kendrick:
Perhaps more importantly than returns is Mag 7B’s lower volatility relative to Mag 7 in every year. Over the full period, average annualized volatility is almost 2% lower for Mag 7B than for Mag 7
Geoff Kendrick, Standard Chartered analyst
Kendrick concluded that seeing Bitcoin as serving multiple roles in investor portfolios could encourage even greater institutional buying.
Related: Softer Crypto Regulations a Mistake, Leaves Investors Unprotected, Says Former SEC Director
Credit: Source link
