After surging past the US$100,000 ($135,975) milestone for the first time in mid-December, the world’s largest cryptocurrency is now too big to ignore. Bitcoin’s most powerful critic-turned-proponent, Donald Trump, will only be sworn into office as the 47th US President on Jan 20, but could the highly volatile digital asset steal the limelight from Trump himself?
Standard Chartered, an early bull on Bitcoin, has already looked past the US$100,000 level; Geoff Kendrick, the bank’s global head of digital assets research, reiterated in November 2024 his expectations for Bitcoin to hit US$200,000 by the end of 2025.
The rally could even go further, says Kendrick, if Bitcoin saw more “rapid uptake” by US retirement funds, global sovereign wealth funds or a potential US strategic reserve fund. Kendrick, who joined StanChart in 2016, predicted in 2023 that the entry of institutional investors would fuel Bitcoin’s rise to six figures.
Following Trump’s win, the stage is set for possible regulatory changes like the repeal of SAB 121 — a guidance document by the US Securities and Exchange on digital assets that requires entities that act as custodians for crypto assets to list the assets on their balance sheets and create a corresponding liability of equal value. This is currently blocking US banks from crypto custody and spot offerings, and removing SAB 121 could attract more institutional investors to digital assets.
US-listed software maker turned Bitcoin accumulator MicroStrategy has been on a buying spree and now owns more than US$40 billion of the digital asset. Cautious investors are treating the Nasdaq-listed firm’s shares as a proxy to Bitcoin, and its stock rose some 322% through 2024.
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Legal concerns
At home, however, Singapore’s largest financial institutions still shy away from commenting on Bitcoin and other cryptocurrencies. Carmen Lee, head of OCBC Investment Research, declined to comment on digital assets, citing legal and compliance directives.
Chong Jiun Yeh, chief investment officer at UOB Asset Management (UOBAM), says it is “still quite a speculative asset” and finds it difficult to identify fundamentals supporting cryptocurrency. Anthony Raza, UOBAM’s head of multi-asset strategy, says: “Being a consumer bank-related organisation, I wouldn’t really look to us to push the envelope on that.”
Meanwhile, DBS’s 118-page 1Q2025 outlook, signed off by its chief investment officer Hou Wey Fook, contains just one mention of Bitcoin: “Heightened geopolitical uncertainty is bullish for gold, and the same holds for crypto given that Trump has shown a great deal of support for Bitcoin.”
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Some readers of The Edge Singapore got a rare glimpse of what investing experts really think of Bitcoin at this publication’s Year-End Investment Forum on Nov 30, 2023. A regional chief investment officer at the world’s largest private bank said he would hold “at least 10%” of his assets in cryptocurrency if not for his role, which restricts him from investing in the volatile digital asset.
“I’ll have it there because I want to make sure that the portfolio itself — the various components that I have — are as uncorrelated as possible. I try to build maybe 10 to 12 uncorrelated return streams so that I can actually hit my target return at the end of the day,” he said.
Another panellist was more conservative, saying his preferred exposure to cryptocurrency would be “anywhere from 5% to 8%” of his personal portfolio. This panellist, who works for an online brokerage, said he holds an “upside target” of US$144,000 on Bitcoin as swings of 20% to 30% are “not uncommon”.
Given Singapore’s tight watch over retail trading of cryptocurrency, however, the two gentlemen were mindful to toe the line; their respective teams reached out after the forum, requesting their names to be redacted.
Bitcoin like Mag 7, gold
Investors should also be alert to Bitcoin’s risks, write a team of experts from BlackRock and BlackRock Investment Institute (BII) in a special five-page research note on the cryptocurrency. “It may not ultimately achieve broader adoption, and it remains highly volatile and vulnerable to sharp selloffs. Over its short history, bitcoin has seen major selloffs of 70%–80% from peak to bottom during its climb to record highs.”
BII acknowledges the main grouse of “traditional” investors: Bitcoin has no underlying cash flows for estimating future returns. “What matters: the extent of adoption. Bitcoin may also provide a more diversified source of return; we see no intrinsic reasons why Bitcoin should be correlated with major assets over the long term, given its distinct value drivers.”
BII says investors should think about Bitcoin the same way they approach the “Magnificent Seven” stocks. “In a traditional portfolio with a mix of 60% stocks and 40% bonds, those seven stocks — if held at their current weights in the MSCI World — each account for 4% of the overall portfolio risk on average. That’s about the same share a 1%-2% exposure to Bitcoin would represent.”
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Even though Bitcoin’s correlation to other assets is relatively low, it is more volatile, making its effect on total risk contribution similar overall, says BII, a thought leadership platform set up in 2011. “A Bitcoin allocation would have the advantage of providing a diverse source of risk, while an overweight to the Magnificent Seven would add to existing risk and portfolio concentration… Above 2%, Bitcoin’s share of total portfolio risk becomes outsized compared with the average Magnificent Seven stock.”
By allocating no more than 2% to Bitcoin, BII believes investors would introduce a “very different” source of return and risk while managing their risk exposure to Bitcoin.
Investors who choose to allocate to Bitcoin should “regularly review” Bitcoin’s changing nature and their allocation, says BII. “Bitcoin is becoming more accessible to institutional investors. Wider adoption and trading could reduce its volatility and make its low correlation with equities more stable. Lower volatility would trim Bitcoin’s contribution to portfolio risk and allow investors to up their allocation.”
Yet, broad adoption could also mean Bitcoin loses its “structural catalyst” for further rallies, says BII. “The case for a permanent holding may then be less clear-cut and investors may prefer to use it tactically to hedge against specific risks, similar to gold.”
