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Bitcoin, the world's largest cryptocurrency, may soon lose its status as a volatile asset, according to Bitwise Asset Management Chief Investment Officer Matt Hougan.
Hougan attributes this change to the significant decline in Bitcoin's price fluctuations over the past decade.
Hougan explained that the current Bitcoin market is fundamentally fueled by a simple supply-demand imbalance. “We have a huge new source of demand coming from these ETFs, and we have an inelastic supply,” Hougan told CNBC's “ETF Edge” on Monday.
The first Bitcoin exchange-traded funds (ETFs) began trading on January 11. Since then, the BTC price has increased by more than 50%, reaching an all-time high of just under $74,000 this week.
Despite the promising numbers, Hougan admits that Bitcoin may not be suitable for everyone due to its tendency to fluctuate. “It moves around too much. Some people have a hard time understanding it,” he said.
While Bitwise is optimistic about Bitcoin's growth, ProShares also has an ETF, the Short Bitcoin Strategy ETF, designed to profit from losses. However, this short ETF has seen a 42% decline so far this year and is down almost 70% in the past year.
But ProShares' Global Investment Strategist Simeon Hyman remains positive. Quoting Mark Twain, he said, “The reports of our demise are greatly exaggerated. We are happy to be here and think we serve as an important alternative.”
Hyman notes that Bitcoin's historical strength predates the launch of spot Bitcoin ETFs. “This month is the anniversary of the collapse of crypto-related financial institutions. Last year, Bitcoin was rising then too,” he says. Hyman believes long-term investors are starting to enter the market for asset allocation and diversification purposes.
*This is not investment advice.