Shark Tank star Kevin O’Leary, aka Mr. Wonderful, announced this week that he’s added Bitcoin to his portfolio. O’Leary seems to have changed his mind after years of skepticism. Here’s why this shift matters to regular investors like us.
Kevin O’Leary’s track record
O’Leary has cultivated a reputation as a savvy entrepreneur and investor. He launched a software education firm in the 1980s which went on to have great success. The company was acquired by Mattel in 1999, making O’Leary a multimillionaire. In the early-2000s, O’Leary appeared on a number of television shows focused on business and investing. His most popular appearance was as co-host of Shark Tank.
With an audience that spans millions of people across North America, O’Leary’s influence is undeniable. Which is why his skepticism about Bitcoin over the past decade may have had an impact on its adoption. O’Leary previously called the cryptocurrency “garbage” and a “giant nothing burger.”
However, the celebrity investor says he has changed his mind after seeing hedge funds and institutions adopt the asset class. “Is #bitcoin a currency? Property? An asset? Maybe all of the above, I’m going with a 3% portfolio allocation,” he said on Twitter yesterday. That multimillion-dollar bet is a powerful vote-of-confidence that could push Bitcoin’s mainstream adoption further.
Bitcoin adoption
Celebrities such as Elon Musk and Mark Cuban have already pushed Bitcoin adoption higher over the past year. As more recognizable business leaders get involved, demand for the cryptocurrency could surge much higher, creating value for early adopters.
I believe the digital asset could also become more stable as more people adopt it. Mass (or perhaps universal) adoption puts a floor on BTC’s market price. Large institutional investors and family offices are notoriously patient, which means Bitcoin’s volatility could decline as more buyers get involved. Retail investors should consider adding exposure too.
Buy Bitcoin
Dedicating a small portion of your portfolio to Bitcoin or other cryptocurrencies such as Ethereum may not be such a bad idea. Mark Cuban and Kevin O’Leary have both allocated less than 5% of their holdings to the asset. Elon Musk put roughly 7% of his company’s balance sheet into it.
A single-digit allocation is probably the safest way to gain exposure. If the Bitcoin experiment fails, you won’t lose much. If it lives up to expectations and surges, the gains could be immense.
The recently listed Purpose Bitcoin ETF (TSX:BTCC.U) is probably the best way to add exposure. Unlike close-ended funds, this ETF trades on par with its underlying asset value. Unlike crypto mining stocks, the ETF isn’t overvalued. It also qualifies for your Tax-Free Savings Account (TFSA), which makes it a better alternative to holding BTC directly.
Bottom line
Noteworthy entrepreneurs and investors are changing their mind about Bitcoin. The digital asset is slowly, but surely, winning the smart money over. Retail investors should probably consider adding a little exposure before it’s too late.
