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Recent Bitcoin price fluctuations triggered by Tesla Elon Musk Institutional fund managers have raised new questions about the future of cryptocurrency as an asset class.
UBS Wealth Management, Pimco, T Rowe Price and Glenmede Investment Management are the companies that have expressed reservations about the investment potential of cryptocurrencies in recent days.
Tesla said that due to environmental issues, it will no longer accept Bitcoin payments for its electric cars, and Musk jokingly referred to Dogecoin as a rival cryptocurrency, calling it “bustle“Appear in Saturday night live TV show.
“Our position with our clients is the ten-foot principle: stay away from it.” said Jason Pride, Chief Investment Officer of Glenmede Private Wealth. “I don’t think the Federal Reserve and other regulators are champions of the current structure of the cryptocurrency market.”
Rob Sharps, President and Head of Investment at T Rowe Price, told the Financial Times: “Encryption has an impact on the entire capital market. We are capital market experts. In the end, our client management is not very entrusted. Suitable for investing in cryptocurrency, we recognize the high level of speculation in this field.”
Highlighting the extreme volatility, Bitcoin was trading at just over US$44,000 on Monday, down about US$20,000 from the record high set a month ago. The latest turmoil triggered by Musk seems to imply that Tesla has or will sell its accumulated shares in Bitcoin on Twitter. He later clarified that the automaker “didn’t sell any bitcoin.”
To be sure, in recent years, Bitcoin has gained a place among investors, and the trading of futures contracts has also become more liquid. U.S. regulators are also considering whether to approve cryptocurrency exchange-traded funds.
However, asset managers said that they are troubled by the failure of cryptocurrencies to meet the expected trend, because cryptocurrencies will not become less volatile over time, or they will not be able to provide investors with hedging measures against stock volatility or inflation.
Pride said: “The volatility of cryptocurrencies is very high. We often see that when stocks sell off, so does Bitcoin, which means it is not a good portfolio diversifier.”
Nicholas Johnson, Pimco’s commodity investment manager, has been questioned by Bitcoin advocates who praised it as a safe haven for inflation after the cryptocurrency rose and the price of gold fell.
He said: “This idea of thinking that cryptocurrencies are inflationary assets is very curious.” “In recent years, inflationary assets have performed poorly, while cryptocurrencies have performed well. People are looking for reasons why cryptocurrencies are rising.”
This week, leading US regulators warned investors that buying mutual funds with exposure to Bitcoin futures is “a highly speculative investment” and warned that mutual funds will make their participation in cryptocurrency activities subject to strict scrutiny. , Which further exacerbated the worry about cryptocurrencies.
U.S. Department of Investment Management Securities and Exchange Commission Said: “Only mutual funds with appropriate strategies to support this type of investment and fully disclose significant risks can invest in the Bitcoin futures market.”
UBS Wealth Management said: “As cryptocurrencies become more and more mainstream, we expect to adopt stricter policies and regulatory measures on cryptocurrencies.” He added that the price fluctuations following Tesla’s announcement “highlight the company. Take the risk of crypto balance sheet risk”.
Tom Jessop, head of digital assets at Fidelity, is more accepting of cryptocurrencies, but he warns that such investments are still in the early stages of development.
He said: “Due to extreme volatility, we see Bitcoin as an ideal store of value, and in terms of its development, it is still in adolescence.” “Some investors are willing to accept volatility because they see Bitcoin as Long-term adventure opportunity.”
Fidelity provides brokerage services that enable more than 100 institutional investors such as hedge funds and family offices to purchase cryptocurrencies and provide them with custody services. Fidelity has a small fund that invests in digital assets for clients. The fund has applied to the US Securities and Exchange Commission (SEC) to launch a Bitcoin ETF.
Even if asset managers avoid cryptocurrencies, due to the increased ability of retail traders to cause volatility in the stock market, this volatility has also attracted the attention of the industry. This is the so-called “substitution effect.”
Vanda Research analyst Viraj Patel said: “Observing the actions of retail investors is as important as the flow of bonds to managers now.” “They are asking if millennials’ capital is buying bitcoins, does that mean they Will stop buying high-beta U.S. stocks?”
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