Investing.com -- Bitcoin could soon be considered more than just a hedge against traditional finance (TradFi). According to Standard Chartered (OTC:SCBFF), the world’s leading cryptocurrency might deserve a place among the world’s top tech stocks.
Geoffrey Kendrick, head of digital assets research at Standard Chartered, argues that Bitcoin currently trades more like a tech stock than a safe-haven asset, pointing to its strong short-term correlation with the Nasdaq.
To test this view, the bank created a hypothetical “Mag 7B” index by replacing Tesla (NASDAQ:TSLA) with Bitcoin in the widely followed “Magnificent 7” group of tech giants. The result, they say, is an index with “both higher returns and lower volatility than Mag 7.”
Bitcoin would rank sixth by market cap among the Mag 7 constituents, ahead of Tesla but still trailing the likes of Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).
Since December 2017, Mag 7B has outperformed the original Mag 7 by about 5%, while also delivering lower average annualised volatility. The improved risk-return profile means that Mag 7B’s information ratio stands at 1.13 versus 1.04 for the original index.
“This suggests to us that Mag 7 portfolios would have benefited from including BTC and removing TSLA over the past seven years,” Kendrick notes.
The strategist believes that broader institutional adoption of Bitcoin could accelerate, especially now that “transaction costs for trading BTC are now similar to those for the other Mag 7 stocks” following the launch of spot ETFs.
These structural developments could help BTC “serve multiple purposes in investor portfolios,” acting both as a TradFi hedge and as part of a growth allocation.
“As BTC’s role in global investor portfolios becomes established, we think that having more than one use will bring fresh capital inflows to the asset. This is particularly true as Bitcoin investment becomes more institutionalized,” Kendrick continued.
Since January 20, Bitcoin has been trading similarly to Nvidia (NASDAQ:NVDA) in terms of volatility-adjusted price performance. In contrast, Tesla, which BTC replaces in the Mag 7B index, has moved more like Ethereum.
“We think that BTC should be seen as serving multiple purposes in investor portfolios; this would open up the possibility of even more institutional buying,” Kendrick concluded.