BITCOIN
Bitcoin's Rise Is Due To Modern Portfolio Theory
The primary reason for the dramatic rise in Bitcoin has been it being increasing used in portfolios of investors who previously avoided it.
Modern Portfolio Theory shows that the most efficient portfolio is one that includes everything that possibly can be invested in, including such alternative assets as collectibles.
Many adherents of Modern Portfolio Theory do not include alternative assets such as collectibles in their portfolios because high transaction and other costs and risks associated with them.
Bitcoin does not have the high transaction and other costs and risks associated with many other alternative assets, which is why mainstream investors are including it pursuant to MPT.
As the price of any asset such as Bitcoin rises, adherents to Modern Portfolio Theory should buy more to maintain its proportion in the Market Portfolio.
Bitcoin dives under $100K as Trump-fueled surge reverses after Fed
Here’s a 5-point summary of Bitcoin’s recent price movement and market factors:
Bitcoin Price Drop: Bitcoin (BTC-USD) fell below $100K after hitting a record high above $108K earlier in the week. It dropped as much as 10% to $92.6K, before recovering slightly to $97.1K.
Altcoins Hit: Other cryptocurrencies also saw significant declines, with ether (ETH-USD) down 6.2%, dogecoin (DOGE-USD) falling 12%, solana (SOL-USD) down 7.4%, cardano (ADA-USD) dropping 6.4%, and XRP (XRP-USD) down 4.2%.
Federal Reserve’s Hawkish Tone: The volatility follows the U.S. Federal Reserve’s hawkish stance on Wednesday, signaling a slower pace of rate reductions in 2025 due to persistent inflation concerns.
Impact of Political and Policy Factors: Before the Fed’s statements, crypto prices had been buoyed by the crypto-friendly rhetoric following Donald Trump's U.S. presidential election victory. However, El Salvador’s decision to scale back Bitcoin-related policies, including discontinuing its Chivo wallet, further dampened sentiment.
Crypto-Linked Stocks: Stocks linked to the cryptocurrency sector experienced mixed performance. MicroStrategy (MSTR) gained 8.2%, Coinbase (COIN) rose 1.8%, and Riot Platforms (MARA) saw a slight gain of 1.1%, while some others, like MARA Holdings and Bit Digital (BTBT), experienced minor losses or gains.
