Navigating the World of Bitcoin ETFs: A Balanced Approach

19th January 2024
The recent approval of 11 spot Bitcoin ETFs in the US has sparked considerable interest and discussion among investors. At Brigantia Private Wealth Management, several clients have reached out to inquire about our stance on Bitcoin and these new investment vehicles.

In this blog post, we aim to provide a balanced perspective on Bitcoin ETFs, highlighting their potential role in diversifying portfolios while acknowledging the inherent risks.
Disclaimer:

It's crucial to note that Bitcoin and cryptocurrency investments are not suitable for everyone. We emphasise that our recommendations are exclusive to Bitcoin, and we do not endorse investments in other cryptocurrencies. Our approach is to consider Bitcoin ETFs for the right clients to add diversification to their portfolios, mindful of Bitcoin's high volatility.
Bitcoin's Role in Diversifying Portfolios:

Let's consider the impact of a modest Bitcoin allocation on a traditional investment portfolio. For example, a classic 60/40 portfolio allocation provided a total return of 53.48% over the last five years, with a maximum drawdown of 21.69%. By adding a 5% Bitcoin allocation, rebalanced annually, the 5-year return increases to 86.6%, with only a marginal increase in maximum drawdown to 23.68%. This represents a significant 60% increase in returns for a relatively small 9% increase in maximum drawdown. While results can vary based on different timescales and portfolios, this example illustrates Bitcoin's potential as an uncorrelated asset to enhance diversification and improve returns with minimal impact on risk.

Cautious Consideration for Bitcoin Investments:

Despite its potential, Bitcoin remains a relatively new and high-risk asset class. We believe it should only be considered for a small subset of our clients with a suitable risk tolerance. Our role is to tailor investment strategies that align with each client's specific needs and goals, ensuring a bespoke and prudent approach.

Our Expertise and Client-Centric Approach:

At Brigantia, we pride ourselves on our expertise across various finance and advisory areas, including Bitcoin. We are among the few firms with in-depth knowledge and experience in this niche. Whether it's exploring new Bitcoin ETFs with very low fees or selecting fixed-term cash deposits for risk-averse clients, we're dedicated to providing tailored financial solutions.
Our commitment is to ensure that each client's portfolio reflects their individual risk profile, financial goals, and investment preferences.

Conclusion:

As we continue to witness the evolving landscape of Bitcoin, our focus remains steadfast on offering informed, balanced, and client-centric financial advice. At Brigantia Private Wealth Management, we're equipped to guide our clients through the complexities of modern investing, including the nuanced world of Bitcoin ETFs.

All figures are correct at the time of writing.