Investors should buy bitcoin at the expense of their gold holdings, according to Mark Jolley, portfolio director at asset management firm CCB International Securities.
Interestingly, bitcoin is illegal in China, and CCBIS is owned by China Construction Bank, one of China’s “Big Four” and among the top 10 largest banks in the world. Cryptocurrencies are, however, legal in Hong Kong.
During a CNBC interview published on Jan. 18, Jolley suggested that a bitcoin allocation belongs in all portfolios, after suggesting that the United States dollar will see significant inflation next year. When the interviewer asked how much should investors allocate to bitcoin, he answered:
“We normally have a 15% allocation […] to gold, bitcoin will come in and replace some of that gold allocation. I’ve set it at 5%.”
While saying that he is “giving it a smaller weight than gold,” Jolley noted that “it has different features than gold.” He added:
“I’m not a tech expert but it is a widely accepted asset class now in the portfolio.”
Before talking about bitcoin, Jolley also pointed out that the United States dollar’s inflation expectation that is implied by the bond market has already increased to about 2%. Still, he expects inflation to be “moderate” this year, and warns that it “may become much more of an issue in 2022.”
This, in turn, may may be good for commodities such as gold and bitcoin, he said.
“Inflation expectation is highly correlated with commodity prices and if we see continued strength in commodity prices, inflation expectations will go up and so will bond yield,” said Jolley. “Actual inflation [is] actually moderate, but inflation expectation could be quite an issue this year.”
United States investor, fund manager, and philanthropist Bill Miller also suggested earlier this month that inflation is likely to propel bitcoin’s rise. He said:
“If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent.”