Fidelity makes it clear: Bitcoin volatility is worth the risk for institutions

A new report shares a number of notably bullish sentiments with regard to Bitcoin and the larger crypto industry.

Listen to article In a recently released report titled Bitcoin Investment Thesis, Fidelity Digital Assets demonstrated how portfolio managers could increase their returns by allocating a portion of their holdings to Bitcoin.

They then diversified these with Bitcoin at a rate of 1 to 3 percent.

In every scenario considered by Fidelity, portfolios holding higher Bitcoin allocations outperformed their less diversified counterparts.

Simulated portfolios that continued to hold Bitcoin benefited from the asset's low correlation with traditional assets.

The report acknowledged that the increasing adoption of Bitcoin by the financial industry may lead to greater correlation in the future, thus reducing diversification benefits.

Fidelity's report additionally estimated the potential redistribution of investments from alternative investments and fixed income to Bitcoin.

The former's market is valued at $13.4 trillion, thus if Bitcoin were to capture 5% of this market, its market cap would increase by $670 billion.

If Bitcoin were to capture 1% of that market, this would translate into another $500 billion.

If the most optimistic forecasts were to materialize, Bitcoin's capitalization could increase to $2 trillion.