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Asset managers express caution on cryptocurrency after price swings

Recent fluctuations in Bitcoin prices caused by Tesla Elon Musk New questions have arisen among institutional investors about the future of cryptocurrencies as an asset class.

UBS Wealth Management, Pimco, T. Rowe Price and Glenmede Investment Management are one of the companies that have recently made reservations about the potential for cryptocurrency investment.

After Tesla said it would no longer accept Bitcoin payments for electric cars due to environmental issues, a turmoil broke out and Musk jokingly called his rival cryptocurrency Dogecoin.HustleAppearing in Saturday night live TV program.

Jason Pride, Chief Investment Officer at Glenmede’s Private Wealth, said: “I don’t think the Fed and other regulators are fans of the current market structure of cryptocurrencies.”

Rob Sharps, President and Head of Investment at T Rowe Price, told the Financial Times: Ultimately, the mandates we manage for our clients are not very suitable for investing in cryptocurrencies. We are aware of the high level of speculation in this area. “

Emphasizing extreme volatility, Bitcoin was slightly above $ 44,000 on Monday, down about $ 20,000 from its high just a month ago. The recent turmoil has been triggered by a mask that appears on Twitter to suggest that Tesla is selling or selling the shares it has accumulated in Bitcoin. He later revealed that the car maker “does not sell Bitcoin.”

Indeed, Bitcoin has gained investor support in recent years, and futures contract trading has become more fluid. US regulators are also considering whether to approve cryptocurrency exchange-traded funds.

However, asset managers say they are suffering from signs that cryptocurrencies are less volatile over time or are not meeting the expectations of investors to hedge against stock turmoil and inflation. ..

“Cryptocurrency volatility is stratospherically high, and when stocks sell out, Bitcoin often sells out, which means it’s not a good diversified portfolio investment,” Pride said. ..

Nicholas Johnson, Pimco’s Commodity Portfolio Manager, raised the issue for Bitcoin proponents who praised it as a paradise for inflation after cryptocurrencies recovered while gold prices were falling.

“This idea that crypto is an inflationary asset is interesting,” he said. “While cryptocurrencies were very strong, inflationary assets have underperformed in recent years. People are looking for justification for why cryptocurrencies have risen.”

Line graph of $ per coin showing that Bitcoin has fallen from a record high

This week, a major U.S. regulator warned investors that buying a mutual fund with exposure to Bitcoin futures was “a very speculative investment,” and its involvement in cryptocurrencies will be closely monitored. Cryptocurrency anxiety was exacerbated when it warned that it would be.

Investment management department Securities and Exchange Commission “Investments in the Bitcoin futures market should only be pursued by investment trusts with appropriate strategies to support this type of investment and the full disclosure of significant risks.”

“We expect more stringent policies and regulatory controls as cryptocurrencies become mainstream,” said UBS Wealth Management. “Price volatility following Tesla’s announcement is that companies are cryptocurrencies. It highlights the risks you face when exposed to your balance sheet. “

Nonetheless, Tom Jessop, head of digital assets at Fidelity, which has been more embracing cryptocurrencies, warned that such investments are still in the early stages of development.

“We call Bitcoin a valuable and ambitious store, and it’s adolescent in terms of development because of its extreme volatility,” he said. “Some investors are willing to accept volatility because they see Bitcoin as a long-term venture opportunity.”

Fidelity provides intermediary services that allow over 100 institutional investors, such as hedge funds and family offices, to purchase cryptocurrencies, and provides them with custodian services. Fidelity has a small fund that invests in the client’s digital assets and has been applied to the SEC to launch Bitcoin ETFs.

Even if asset managers shy away from crypto, fluctuations in their valuations are a concern for the industry, as retailers are becoming more powerful in causing equity market volatility known as the “substitution effect.”

Viraj Patel, an analyst at Vanda Research, said: “They are asking if Millennial Capital is buying Bitcoin, does this mean they will stop buying high-beta US stocks?”

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Asset managers express caution on cryptocurrency after price swings Source link Asset managers express caution on cryptocurrency after price swings

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