Licensed crypto exchanges, Bitcoin funds and a regulated futures market lend themselves to trend-following volume funds, asset managers and family offices for investment that didn’t exist a few years ago. Mix this year’s 170% jump in Bitcoin’s price amid a once-in-a-generation pandemic, and it becomes clearer why more organizations could increase the size of the volatile asset.
“The proliferation of regulated crypto exchanges and custodians has eliminated the ‘career risk’ for institutional investors,” Henri Arslanian, PwC’s Global Crypto Leader in Hong Kong, said in an interview. “In 2017, FOMO was retail. question is whether we see institutionalized FOMO in 2021. “
Bitcoin started December by hitting a slightly shy record of $ 20,000. Supporters argue that it is shadowing on gold as a portfolio diversifier, as stimulus injections to counter the economic damage from the pandemic weaken the dollar. Critics see pure gambling by retail investors and speculative exploits in a scandal-prone sector, and predict a bust like the one after the peak three years ago.
JPMorgan Chase & Co. strategists highlights the Grayscale Bitcoin Trust – which invests in the digital coin and tracks its price – as a potential window into a broader crypto prestige beyond retail demand from Millennials.
The trust’s “exponential” growth suggests that longer-term investors such as asset and family office managers may have been more involved in recent weeks, compared to commodity trading advisors following trends, a team led by Nikolaos wrote Panigirtzoglou in a note on November 27..
Grayscale’s vehicle assets zoomed to more than $ 10 billion from $ 2 billion at the beginning of December last year, its website and fact sheets show. Nearly $ 720 million drew inflows in the third quarter, according to an investment report, which said institutions – dominated by hedge funds – account for 81% of the money coming into the company’s digital asset funds.
Last month, Guggenheim Partners LLC set aside the right to invest its $ 5.3 billion Macro Opportunities Fund in the Grayscale trust.
“Institutional investors are keen to build a portfolio in the wake of Covid, and the ways in which they need to reposition themselves given how governments have injected leverage into the system,” said Michael Sonnenshein, managing director of Grayscale Investments in York New, in an interview, is adding the size of investment allocations is growing.
Over the summer, Fidelity Investments announced the launch of a passively managed Bitcoin fund aimed at qualified buyers through family offices, registered investment advisers and other organizations. Square Inc.’s public companies invested and MicroStrategy Inc. in the recent coin. Investment managers Paul Tudor Jones and Stan Druckenmiller have backed the digital asset as a hedge against potential inflationary pressures, although price rises remain subdued.
Strategists have begun expanding or starting coverage of Bitcoin, sensing increased demand for crypto analysis in the financial industry.
One example is US brokerage BTIG LLC, whose chief equity and derivatives strategist Julian Emanuel wrote last month that cryptocurrency will come of age in part because of the policy response to the economic blow from the pandemic.
Digital assets remain a marginal market for the approximately $ 52 trillion of institutional investor-managed funds. After all, total crypto market capitalization is just $ 580 billion, according to data tracker CoinMarketCap. In addition, potential obstacles remain, such as the fact that Bitcoin ownership is concentrated among a few large holders often referred to as whales.
Still, PwC’s Arslanian expects increasing pressure on asset managers to consider Bitcoin as investors become more comfortable with it. “The question that investors ask fund managers will gradually change from ‘why did you invest in crypto?’ to ‘why haven’t you yet invested in crypto?’ “he said.
This story was published from a wire agency feed without modifications to the text.