HBSC: Allocate Portion Of Portfolio To Crypto
Cryptocurrency is growing in acceptance as an asset class. To me, this is going to keep going until it rivals equities.
This might be stunning considering that many are taking the approach of crypto, specifically Bitcoin, as "digital gold". For that coin, it might be the case. However, as we look across the entire crypto space, we see enormous potential.
For the moment, we are still dealing with a high degree of risk. The focus is upon market activity and not on what is being built. It is sensible since there is not a lot out there generating consistent revenues. Hence, the assertion there is no value to crypto isn't exactly wrong.
That said, it is more accurate to state it simply hasn't been built yet. Tokenization is not disappearing.
At present, the idea is that cryptocurrency is a new asset class. While it might be true, this will morph into a time when all assets are crypto.
Which leads us to HSBC. This is one of the best known investment banks. It gave a major affirmation for cryptocurrency.
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HSBC: Give 1%-5% To Crypto
The bank has been researching crypto extensively.
According to this article, HSBC started to look into crypto a couple years ago. Over that time, it ran million of simulations, trying to determine the impact upon portfolios.
This led to the bank concluding that an allocation of between 1%-5% of a portfolio into crypto is a prudent way to diversify.
It is in alignment with many other suggestions towards gold and other commodities.
Hence, we once again run into the digital gold narrative.
For the time being, this can work in the favor of crypto. By having another major institution starting to recommend it, we have another feather in ongoing battle against governments.
As for market watchers, over time, this should provide more buy pressure.
Hybrid State
We are rapidly entering what I size up as the "hybrid state" of cryptocurrency. This is where most of the spectrum is hijacked by the traditional financial institutions. They will be aided, of course, by governments which will push the control in their hands.
It is something we witnessed over the last couple years with the SEC in the United States regarding Bitcoin ETFs based upon the spot pricing. We see a ton of BTC floating into the hands of the banks.
This is a natural part of the progression. With something so large, and regulated, we are not going to see a complete removal of the major players instantly.
Instead, it will be an evolutionary transition based upon development. Centralized entities will always be that way. The system prefers it. What is overlooked is the fact that intermediaries will not be needed once infrastructure and services are in place.
As always, decentralization is a direction more than a destination.
It becomes a game of transactions. Where is the activity taking place?
The centralized entities, along with the regulators, want it done where they have control. Over time, development must unfold in a manner where more transactions operate on decentralized platforms. Each one that occurs there is one less on the centralized counterparts. When this is combined with other financial services, we can see how choices will be available.
At that point, it comes down to competition. Can centralized entities compete with a system that removed intermediaries, cost, and friction? More accurately, can their business models withstand it?
Time will tell on that one.
Logic tells me, they will compete while they have the massive advantage in infrastructure and power. Over time, I see that waning as things spread out more.
Here is where building is crucial.
Ease of Use
The area where centralized entities excel is in developing applications and services that are easy for people to use. In fact, they build entire systems within their organizations to achieve this end and engage with the customer (users).
We could look at the entry into artificial intelligence as another layer. While the focus is on LLMs, AI is being used for customer notification, security, and account monitoring. All of these have benefits.
Platforms built in the decentralized realm has to take this lesson. At the moment, things are a bit clunky when it comes to using them. This will improve over time.
For nOow HSBC is recommending dedicating a portion of portfolios to crypto. This is likely to pull in more money over time. Add in the publicity around BTC ETFs along with the expected, at some point, approval of Ethereum ETFs, and we can see how these will become standard products in the financial world.
Things are moving ahead on many levels.
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Here in the UK, the banks are generally fiercely anti-crypto, partly because they are highly risk averse, and partly because they are losing liquidity (that they can use for fractinal reserve banking) to it. This is reinforced by a very anti-crypto government stance (despite what they might say - they want a CBDC, but hate anything where they don't have 100% control).
Many UK retail banks will freeze or close accounts if the owners buy crypto with them. HSBC seems to be an exception; they publish lots of warnings about the risks, but if you only buy a little and not too often they seem to be okay with it.
I make sure that every pound I spend on crypto is matched by putting a pound into a savings account with them. Seems to keep them happy 😀
This is a technology.
The risk that countries run, in my opinion, is being left behind. Those that were late to the internet spent years trying to catch up.
CBDCs are going to fail miserably. Any country hanging its hat on that is going to be left out in the cold.
Things are moving ahead in many facet in the crypto world. Crypto coins becoming the new world asset is feasible now already even in Hive
Question??
Do you think that crypto will always be decentralized or will in in the future end up a centrailized thing?
With banks in the US grtting involved in crypto, I see an opening for our governments to jump in & try to take control.
What I know about this is that as long as your crypto is crypto you have nothing to worry about but once you convert your crypto into USD, **you now have to consider it income & should add that income to your taxes each year. The US government treats crypto as they do stocks & other investments.
**I am not a financial advisor & readers should do their own research.
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That is the multi trillion question.
I have a feeling there will be decentralization in the long term. However, we are going through a hybrid time where the centralized entities are going to be involved.
We are going to see a lot of the older systems hijacked, like Ethereum.
However, we are also seeing development in the open, decentralized world which is promising.
I really hope you're right on this.
I just know that here in the US the government is always trying to control everything. I'm safe for now though, I just swap out one token for another never taking it off hive or converting to USD.
All governments try to control. That is their nature. It is why that, no matter the system, we end up with tyranny run by parasites.
It's good to see HSBC taking those first steps into crypto. I think you're right that more will inevitably follow especially one ETH ETF's are approved. It will be interesting to see how this will play out with big banks, of course they will have to participate to compete but will undoubtedly cut into their profits long term.
This reminds me how a Japan investment company was also looking to add crypto to their investment as well. The upside of crypto is hard to ignore, and just allocating a small amount can limit their risk.
I am sure there are a lot looking at the opportunity.
Many financial firms will start offering it to varying degrees.
1% to 5% for crypto diversification. Not fully sold out, but does not want to be left out. That's a prudent stance somehow.