Bitcoin is once again on the move, and not for the better. The popular cryptocurrency hit its lowest price since the beginning of December, sinking below $43,000, reports CoinDesk. The slide comes after the release of the Fed minutes from December, which indicate that the central bank is looking to shrink its balance sheet.
Bitcoin has been considered by some to be a good inflationary hedge at a time when stimulus from the central bank to combat pandemic shutdowns in 2020 ultimately helped spur inflation along. With the Fed now eyeing a greater reduction in its balance sheet, it could prove to be a downward pressure on the most popular cryptocurrency.
“Some participants judged that a significant amount of balance sheet shrinkage could be appropriate over the normalization process, especially in light of abundant liquidity in money markets and elevated usage of the ON RRP (overnight reverse repurchase agreement) facility,” according to the minutes from the Fed meeting.
At a time when bitcoin and other cryptocurrencies and tokens are sliding, investing in a wider range of crypto assets could help to mitigate losses while still holding onto exposure to the crypto space. Crypto exchanges generally have different return characteristics and are leveraged differently to bitcoin movement than are crypto miners, which are leveraged differently from crypto service providers, and so on.
See also: A Defensive Approach to Crypto Investing With Crypto Equities
BITQ Diversifies Across Crypto Equities
With cryptocurrencies sliding, investors looking to still invest within the industry should consider funds that carry a diversity of crypto and blockchain-related assets that might perform well even when cryptocurrencies are underperforming. The Bitwise Crypto Industry Innovators ETF (BITQ) offers investment into some of the largest companies within crypto within a variety of segments.
BITQ tracks the Bitwise Crypto Innovators 30 Index, an index with at least 85% allocation into companies that are cryptocurrency exchanges carrying bitcoin and other cryptocurrencies, crypto miners, mining equipment companies, and service providers. The remaining 15% is allocated to large-cap support companies with at least one major part of their businesses dedicated to crypto.
BITQ carries crypto companies such as Coinbase Global Inc (COIN), a major crypto exchange, at 10.62%; Silvergate Capital (SI), a bank that provides services for crypto exchanges, at 10.35%; and crypto mining companies such as Hut 8 Mining (HUT CN) at 4.43%.
The fund has an expense ratio of 0.85% and net assets of nearly $127 million.
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