After Plunge, Institutions Don’t Trust Bitcoin Again

Institutional fund managers are questioning whether cryptocurrencies can be a good investment after Bitcoin’s “big shock.

After Plunge, Institutions Don't Trust Bitcoin Again

One word from Musk can cause a sharp rise and fall in the cryptocurrency market.

Last week Musk questioned the energy drain of Bitcoin and announced that he was stopping payment in Bitcoin for Tesla purchases.

Only a month ago, Tesla announced that it would accept bitcoin as a payment method.

Such a vastly different contrast, from the same person and the same company, has had a very different impact on the market.

As a result, institutional fund managers have expressed doubts about whether cryptocurrencies can be a good investment.

UBS Wealth Management (RSW) says that as cryptocurrencies become more mainstream, we hope for stricter regulatory policies, but now Musk and Tesla’s announcements can sway the price of bitcoin.

Nicholas Johnson, a commodities investment manager at Pacific Investment Management (Pimco), questioned bitcoin’s inflation-hedging properties: “Whenever cryptocurrencies go up and gold goes down, bitcoin advocates call it a better inflation-hedging asset. But that’s an afterthought,”

Rob Sharps, president and head of investments at T. Rowe Price, says cryptocurrencies are relevant to the overall capital markets, but ultimately does not recommend clients invest in them because they are highly speculative assets.

Tom Jessop, head of digital assets at Fidelity Investments, said cryptocurrencies are becoming more recognized and accepted, though crypto asset investing is still in its early days. “We see bitcoin as an ideal store of value, not in terms of its high volatility, and it’s still in the early stages of development. But if investors are willing to take on that volatility, then Bitcoin could be a long-term venture capital opportunity.”

Jason Pride, chief investment officer of private wealth at investment management firm Glenmede Investment Management, judged that neither the Federal Reserve nor other regulators would support cryptocurrencies. The SEC (Securities and Exchange Commission) has publicly questioned the safety of bitcoin several times this year, and the approval of a bitcoin ETF is far from certain.

Pride also believes that bitcoin is not a good diversifier because whenever stocks are sold off in large numbers, so is bitcoin.

Bitcoin’s current market cap is nearly $0.85 trillion, after once being over $1 trillion. With such a high market cap, it means that it’s hard to look at bitcoin independently of other mainstream markets today.

Viraj Patel, an analyst at Vanda Research, for one, said that watching retail investors in the cryptocurrency market is just as important as keeping an eye on bond managers. That’s because if millennials are going to buy bitcoin, does that mean they won’t be buying much in the highly valued U.S. stock market.

According to data released Monday by cryptocurrency asset manager CoinShares, it has a record $98 million in outflows from bitcoin products and funds under management.

However, it has seen net inflows of $4.3 billion in bitcoin assets under management so far this year, compared with $15.6 billion in 2020.

As of this writing, bitcoin is trading at $45,060.82, up 3.98% today, according to CoinMarketCap.

Posted by:CoinYuppie,Reprinted with attribution to:
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