Bitcoin Dip Could Be Buying Opportunity, According to Expert
After four consecutive months of gains, bitcoin stumbled on its first day of trading. The failure at First Republic Bank and speculation that the Federal Reserve may offer a more hawkish-than-expected forecast later this week are among the culprits behind Monday’s slide.
It’s possible that the next few days could be challenging for cryptocurrencies, but for investors willing to look at digital assets longer, bitcoin’s ominous start to May could represent a buying opportunity. The same can apply to exchange-traded funds such as e.g Invesco Alerian Galaxy Crypto Economy ETF (SATO).
SATO, which tracks the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index, has mostly equities, but these components are correlated with bitcoin price action. Put another way, the Invesco fund gives investors an opportunity to participate in potential bitcoin upside without having to own the digital currency directly.
It is relevant on several fronts. First, direct crypto ownership is not suitable for all market participants. Second, SATO offers continued responsiveness to bitcoin price movements, making it a potentially useful instrument for leveraging the asset’s rebound ability—a scenario that some market observers believe will materialize.
“Bitcoin and the crypto-financial system were created precisely for times like today,” wrote Bernstein analyst Gautam Chhugani. “Crypto was not just a bubble from the low interest rate era (perhaps it was temporary). Crypto is emerging as a solution in the midst of economic collapse and an alternative to centralized monetary systems.”
Chhugani added that bitcoin could be an ideal resource for environments where there is stress in the traditional banking system. That is exactly what is happening today. With the collapse of First Republic, three domestic banks fell apart in recent months, representing three of the largest bank failures in US history.
Another point that could work in favor of bitcoin and SATO is a weaker dollar, which could be accelerated by the reluctance of some members of Congress and the White House to reduce spending. Some bitcoin backers believe the asset is one of a small number that could benefit from the rapidly increasing US debt burden.
“As the narrative against a weaker dollar picks up, we think bitcoin will re-emerge as a faster horse than gold,” Chhugani said. “Furthermore, we believe it will also trigger a new crypto cycle, bringing about a new wave of innovation in crypto-based decentralized financial systems.”
SATO has 37 holdings and an annual expense ratio of 0.61%, or $61 on a $10,000 investment.
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VettaFi LLC (“VettaFi”) is the index provider for SATO, for which it receives an index license fee. However, SATO is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or responsibility in connection with the issuance, administration, marketing or trading of SATO.
The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.
