Five Reasons Millionaires Are Investing Back In Bitcoin
Bitcoin, the leading decentralized digital currency that operates on a peer-to-peer network without a central authority, has become the focus of investors recently due to several factors.
In fact, a recent report from financial firm deVere Group analyzed data that revealed that an astonishing 82% of millionaires are now seeking advice on Bitcoin investments.
According to the report, Eight out of 10 high net worth individuals (HNWs) have asked their financial advisors to include cryptocurrencies, such as Bitcoin, in their portfolios in the past 12 months – despite the market facing a difficult year in 2022.
While Bitcoin remains a highly speculative and volatile investment, its growing acceptance and increasing institutional adoption has made it a focus for investors looking for alternative investment opportunities. It is important for potential investors to thoroughly understand the risks and volatility associated with Bitcoin before investing.
Five reasons why HNW investors are buying up Bitcoin
#1 Scarcity
Bitcoin has a limited supply of 21 million coins, making it a scarce resource, which has attracted investors looking for an alternative to traditional investments. Its ‘limited edition’ availability means that even though its value has risen, and fallen, and risen over the years, as the world’s most popular cryptocurrency, it will most likely always remain reasonably priced.
#2 Volatility
Oddly enough, Bitcoin’s volatility is one of the reasons why it is so popular with investors. The price can fluctuate a lot in short periods, which creates the potential for high returns, but also higher risk. For players in big-ticket markets who can afford to watch and wait for the value to rise, it’s a good bet.
#3 Decentralization
Bitcoin’s decentralized nature has made it attractive to investors looking to diversify their portfolios away from traditional financial systems that are often subject to government control and regulation. Privacy is becoming increasingly difficult to maintain as governments continually attempt to regulate and control the crypto market.
#4 Increased institutional adoption
In recent years, major financial institutions and companies have shown increasing interest in Bitcoin, lending credibility to the asset and further fueling investor interest. El Salvador made Bitcoin legal tender in 2022, as banks expand their cryptocurrency services in an effort to keep up with the more nimble and innovative fintech technology.
JPMorgan, like many other large legacy financial institutions, including Fidelity, BlackRock and New York Bank Mellon, have also started offering crypto-related services to their clients.
#5 Macroeconomic factors
The economic uncertainty caused by the COVID-19 pandemic, as well as low interest rates and increased monetary stimulus, have also contributed to an increase in Bitcoin’s popularity among investors.
Why is Bitcoin growing in popularity again?
Speaking about the results of the recent study, Nigel Green, CEO and founder of the deVere Group notes: “In 2022, the crypto market delivered its worst performance since 2018, with Bitcoin, the headline-grabbing market leader, falling around 75% over the year.
“The price drop came as investors reduced exposure to risk assets, including stocks and cryptos, due to heightened concerns about inflation and slower economic growth.
“However, against this backdrop of the so-called ‘crypto winter’, HNWs consistently sought the advice of their financial advisors to include digital currencies in their portfolios.”
He continues: “Interestingly, this typically more conservative group was undeterred by the bear market and adverse market conditions. Instead, they were looking to either start including or increase their exposure to crypto.
“This suggests that these high-net-worth clients are increasingly aware of the inherent characteristics of cryptocurrencies such as Bitcoin, which have the core values of being digital, global, borderless, decentralized and tamper-proof.
“Wealthy investors understand that digital currencies are the future of money, and they don’t want to be left in the past.”
Many of these HNWs polled will also have seen a consistent increase in interest expressed by institutional investors, including Wall Street giants, bringing additional capital, leverage and confidence to the sector.
Is crypto winter thawing?
The DeVere CEO believes this momentum of interest is set to build further as the “crypto winter” of 2022 thaws.
“Bitcoin is on track for its best January since 2013 based on hopes that inflation has peaked, monetary policy is becoming more accommodative, and the various crises in the crypto sector including high-profile bankruptcies are now in the rearview mirror,” he says.
“The world’s largest cryptocurrency is up over 40% since the turn of the year, and this will not go unnoticed by HNW clients and others looking to build wealth for the future.”
Green added, “If HNWs expressed such tremendous interest in the 2022 bear market, as market conditions continue to improve, they are going to be among the first to benefit from the upcoming bull run.”
