It’s been a big year so far for Bitcoin. In the ETF market, Bitcoin ETFs have found strong traction in their debut year. Adoption does remain a little challenged, as my colleague Roxanna Islam noted this week. But product development in the space is still heating up, with interesting new strategies coming to market. So, we wanted to take a moment and revisit the investment opportunity for Bitcoin as we head towards the end of the year.
We sat down with Samir Kerbage, CIO of Hashdex, to get his perspective on the state of things. He has a finger on the pulse of crypto markets. Hashdex is a global crypto asset manager behind products like the Hashdex Bitcoin ETF (DEFI B-). Good Year for Gold and BitcoinCinthia Murphy: Gold has benefited amid macro uncertainty and weakened US dollar. It’s been a great year for gold. Bitcoin, too, should also benefit in the same environment. Make the investment case for bitcoin vs. gold as we navigate Q4 and look ahead to 2025.
Samir Kerbage: Bitcoin and gold share a narrative as hedges against macroeconomic uncertainty, particularly in environments marked by a weakening US dollar, inflationary concerns, and geopolitical instability. Gold, as a centuries-old store of value, has benefited from these factors and performed well recently, up about 40% in the last 12 months. However, bitcoin offers distinct advantages that are especially important in the current environment.
For example, bitcoin’s scarcity is mathematically enforced through its 21 million supply cap. BY comparison, gold supply could technically increase with new discoveries or mining technology advances. This enforced scarcity combined with its borderless and permissionless nature makes bitcoin attractive in a world where government debts are reaching new records and central bank money printing continues. And, in addition to this view of bitcoin as “hard money,” it’s also a liquid asset available to anyone in the world. It can be transferred with incredible ease, especially relative to gold.
It’s also worth noting that bitcoin’s adoption as an institutional asset continues to gain momentum, something we expect to accelerate in 2025. The unprecedented success and growing interest in bitcoin ETFs—including recent investments by a number of public pension funds in the US—is arguably the most notable of these institutional developments.
So, we think many investors are indeed viewing bitcoin as a “digital gold” store of value investment, which has helped fuel interest in bitcoin. It has also contributed to it returning over 120% in the last year, three times the return of gold during that period.Bitcoin Goes MainstreamMurphy: You could say that Bitcoin has gone mainstream. It has found its way into dinner party conversations everywhere. But how is actual adoption? Any insight into who’s buying bitcoin – directly or through ETFs – and why?
Kerbage: Bitcoin has undoubtedly entered mainstream conversations, but we are still early in the general public’s understanding. Who is actually buying these bitcoin ETFs? The first wave has been mostly retail investors and I think there is a particular interest from younger generations—Millennials and Gen Z—who intuitively understand how our lives are digitalized and see the benefit in holding this “digital gold” over time. Their motivations vary, of course. Retail investors often see bitcoin as an inflation hedge, an alternative to the debasement of fiat currencies, or as a way to participate in the broader, growing digital economy.
But it’s clear that financial advisors and large institutions are also ramping up their exposure. Again I’m generalizing here, but these investors typically view bitcoin as an important portfolio diversifier, uncorrelated to traditional assets.
This is a new asset class and these entities need more time for their due diligence. But we’ve already seen some of the more conservative large institutional investors, including public pension plans for the states of Wisconsin and Michigan, get exposure to these ETFs. This will only increase over time, especially as regulatory clarity improves. Key Digital Asset TrendsMurphy: As a global crypto-native firm, what are the key trends in digital assets you are currently watching both in the US and abroad?
Kerbage: Several key trends are shaping the digital asset space, both in the US and in other regions. One of the big ones is the tokenization of traditional assets such as real estate, equities, and bonds. This digitalization of real-world assets is rapidly gaining traction. Many traditional financial institutions, as well as governments, explore how blockchain technology can enhance liquidity and accessibility in financial markets.
Regulatory developments is another area where important progress has been made, and will continue to help improve the investment landscape for crypto. In the US, the lack of a regulatory framework and ongoing regulatory uncertainty around crypto assets—specifically in relation to securities laws—has been an issue for both businesses and investors. Regulatory risks remain one of the most significant barriers to further crypto ETF product development and next month’s election has brought added uncertainty to the regulatory landscape for digital assets.
But we believe that regardless of who wins the election in November, the environment for crypto assets will be better than what it has been in recent years. Part of what has been forcing this progress in the US is Europe and countries like the UAE and Hong Kong establishing clearer frameworks, which is attracting more institutional participation.
Other trends to watch include the intersection of crypto and AI and the development of decentralized finance applications. DeFi continues to evolve with new governance structures, and innovations in liquidity provision, which is creating more opportunities for an open and accessible financial system. Bitcoin's CreatorMurphy: You’ve recently made a statement that stood out to me. You said Satoshi Nakamoto’s biggest accomplishment wasn’t just the creation of Bitcoin but his anonymity. Tell us more.
Kerbage: The mystery of Bitcoin’s creator has captivated the world for over a decade. But the reality is that Satoshi Nakamoto’s greatest contribution wasn’t just Bitcoin—it was remaining anonymous.
This anonymity allowed Bitcoin to thrive into the decentralized network that it is today. Unlike previous attempts to create digital currencies in the 1980s, 1990s, and 2000s, Bitcoin has grown without the control of any one person or entity—even its pseudonymous creator. Satoshi’s anonymity insulated Bitcoin from regulatory challenges. This ensured that it couldn’t be targeted or co-opted by external forces, governments, or corporations.
Moreover, anonymity ensured that Bitcoin’s principles—particularly decentralization—took center stage, rather than any individual’s personality or influence. This allowed the community to focus on the technology, its security, and its adoption. It helped Bitcoin evolve into the global, robust network it is today.
At this point in Bitcoin’s 15-year history, uncovering its founder’s identity is more of an intriguing narrative for history books and movies. It has no bearing on Bitcoin’s fundamentals or long-term investment case, which continues to be strengthened by its utility, security, and growing adoption. "Right Dosage" of BitcoinMurphy: In a recent social media discussion, someone noted that Charlie Munger has likened bitcoin to rat poison. Your reply was that the only difference between poison and medicine is the dosage. How should investors think about the “right dosage” of bitcoin?
Kerbage: Bitcoin’s role as a portfolio diversifier stems from its generally low correlation with traditional assets like stocks and bonds. Because of this, even a small allocation can have an outsized impact on overall portfolio performance. However, given its inherent volatility, it’s important for investors to assess their personal risk tolerance, time horizon, and overall strategy when determining the “right dosage” of Bitcoin.
For conservative investors, a smaller dosage—around 1 to 2%—might offer exposure without introducing excessive risk. Those with a higher risk appetite or longer time horizon might consider a larger allocation, perhaps 5 to 10%. However, higher allocations—like 30 to 40%—can completely alter the risk profile of a traditional portfolio, acting more like rat poison than medicine for those unprepared for the volatility. It’s crucial to strike a balance that enhances your portfolio rather than undermining it. Also, regularly rebalancing your portfolio will ensure the “dosage” remains aligned with your overall financial goals.
We encourage our investors to have an extended horizon when investing in this asset class. We’ve found that if an investor with a modest allocation to bitcoin holds it for at least three years, 98% of the time they will generate positive returns. Generally speaking, long-term investors might consider allocating more, while short-term investors should consider the asset’s volatility and opt for smaller allocations.
When it comes to Bitcoin exposure, ETFs are like regulated medicines, offering safety and oversight to mitigate risks. In contrast, direct Bitcoin allocation is like using natural products, potentially more effective, but with higher risks and less control. Without knowing what you’re doing, you could easily face trouble.
ETFs provide flexibility, liquidity, and regulatory reassurance, while direct investments require a deeper understanding of the asset’s risks.
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