Kevin Helms
Fidelity Discusses Bitcoin as Portfolio Insurance — Could Soon Stand in ‘Stark Contrast’ to Path Fiat Currencies Take
Fidelity Digital Assets, a subsidiary of Fidelity Investments, says that bitcoin could be considered portfolio insurance. The firm notes that the cryptocurrency “may soon stand in stark contrast to the path that the rest of the world and fiat currencies may take — namely the path of increased supply, additional currency creation, and central bank balance sheet expansion.”
Fidelity Says Bitcoin Could Be Portfolio Insurance
Fidelity Digital Assets, a subsidiary of Fidelity Investments, recently published a research study titled “The Rising Dollar and Bitcoin.” The research outlines “how bitcoin could be considered portfolio insurance” as the rising dollar impacts global currency markets.
“The strengthening U.S. dollar is wreaking havoc among other countries and may put pressure on the Federal Reserve to soon reverse its tightening monetary actions, something that has precedent based on 1985’s Plaza Accord,” Fidelity explained.
In addition, “more monetary debasement may be needed to alleviate the high debt load among developed economies,” the report details, adding that “recent events in the United Kingdom have shown counterparty and liability risks in the system, making monetary intervention and doses of liquidity features that are not likely to go away any time soon.” The firm continued:
Comparatively, bitcoin remains one of the few assets that does not correspond to another person’s liability, has no counterparty risk, and has a supply schedule that cannot be changed.
“Therefore, bitcoin may soon stand in stark contrast to the path that the rest of the world and fiat currencies may take — namely the path of increased supply, additional currency creation, and central bank balance sheet expansion,” Fidelity clarified.
“While the U.S. dollar remains very strong relative to other fiat currencies, the reality of the U.S. financial system is that it is in a similar position as the U.K. in the long run,” Fidelity asserted, elaborating:
With the high debt-to-GDP ratio it is unlikely to be equipped to handle higher real interest rates for a sustained period of time if the country aims to fulfill its current debt obligations.
Fidelity Digital Assets has been ramping up its crypto services. The firm will start offering ether (ETH) trading and custody on Oct. 28. It also recently announced the launch of an Ethereum index fund, citing client demand for exposure to digital assets beyond bitcoin.
Do you agree with Fidelity on bitcoin as portfolio insurance? Let us know in the comments section below.
