Anthony “Pomp” Pompliano, the founder and partner at Morgan Creek Digital Assets, an investment company that provides access to cryptoassets for institutional investors, recently said that bitcoin (BTC) is a “non-correlated asset.”
Investing "1 To 2%" Into Digital Assets
Pompliano explained that “if [we] look at the correlation between” bitcoin and the S&P 500 (American stock market index based on the market cap of 500 large firms having common stock listed on the New York Stock Exchange or Nasdaq) over the last 6 months, then “it’s at zero.” He also noted that “if we look at the Dow index" (Dow Jones Industrial Average), it’s correlation with BTC is “near zero.”
This, according to Pompliano, “proves” that bitcoin, the flagship cryptocurrency, is “not correlated” and his firm “expects [this] to continue.” Commenting on how to invest in digital assets, the economics and sociology graduate (from Bucknell University) recommended that people invest “1 to 2% into bitcoin” and/or other cryptoassets. Pompliano further suggested that equities should constitute “a major portion” of an investor’s portfolio.
There’s “Definitely A Psychological Componnt” To Investing
Investing significantly more in equities could mean that the investors “get hit much harder on the equities side”, even though BTC price has dropped more when compared to equities, Pompliano remarked. The former US Army veteran added that there are “definitely psychological components at play here as the stock market pulls down.”
When asked about whether the owners of FANG stocks (the “four high-performing technology stocks” including “Facebook, Amazon, Netflix and Google”) would also be invested in bitcoin and other cryptocurrencies, Pompliano said “that’s what it feels like to me.” In response to a question about the future performance of BTC, the former product manager at Facebook thinks “we’ve got lower to go.”
"Long Bitcoin, Short The Bankers"
Notably, Pompliano believes bitcoin price could drop below the $3,000 mark, however, the short-term decline in the cryptocurrency’s value does not mean it will fail to become a legitimate asset class. He noted that:
There’s a saying we have in crypto that says ‘long bitcoin, short the bankers’ … it’s the idea that cryptocurrency is incredibly transparent, it’s driven by math and software code. I think that there’s a lot more … lack of transparency … and nefarious activity that goes on in the traditional financial markets.
Crypto is still just fairly small, and so if we’ve got a fixed supply asset (such as bitcoin), then [when] increased demand comes in … we’re [potentially] going to get an increase in price.
As CryptoGlobe reported in late November, Pompliano had said “more investors need to be educated” about the fundamental concepts behind digital currencies. He added that more institutional investors need to “become familiar with the technology and investment opportunities” in the crypto market - before they begin to feel comfortable investing in digital assets.