Bitcoin ‘boom’ failing to attract big name investors _ The Independent bitcoin value dollars

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Man predicting collapse of banks sells everything for bitcoin

This year, though, a flood of new hedge funds focused on cryptocurrencies has offered institutional investors who might be unfamiliar with the market a potential route into the world of digital currencies.

According to autonomous NEXT, a financial technology research house, 84 so-called crypto hedge funds have been launched this year, taking the total to 110 with about $2.2bn in assets altogether.

But the fact most of the funds are relatively small with a limited track record – and that cryptocurrency price swings have been so pronounced – means the world’s pension funds, insurance companies and large mutual funds are staying away.Bitcoin value dollars

“while cryptocurrencies are probably here to stay, they are difficult to analyse, wildly volatile and some may be prone to fraud,” said trevor greetham at royal london asset management (RLAM), part of the royal london life insurance company.

“diversification is a good thing but that doesn’t mean investing in everything just because it’s there. We favour assets with a long track record in producing returns or reducing risks,” said mr greetham, who heads RLAM’s multi asset team.

Autonomous NEXT partner lex sokolin said there were probably only a couple of funds worth several hundred million dollars with most in the $5m to $20m range – well below the threshold most institutional investors would consider.

“for many institutional, discretionary fund managers, those funds wouldn’t get cleared because the big question would be around liquidity,” said james butterfill, head of investment strategy at ETF securities in london.Bitcoin value dollars

‘BUBBLES, BOOMS AND BUSTS’

One way mainstream money managers could get exposure is by investing in a basket of hedge funds that includes a crypto fund. But the head of hedge funds at a major european bank that invests in more than 100 hedge funds said there were no crypto funds in his portfolio.

“it’s a very controversial proposition,” said the banker, who declined to be named. “it’s unlikely that the most established hedge funds will make big bets on this because you could put your core business at risk.”

Determining the value of bitcoin and other cryptocurrencies is tricky. There are almost 17 million bitcoins in existence now but the total supply is limited to 21 million, and that won’t be reached until the next century.

Bitcoin’s total value, or market capitalisation, is close to $100bn, bigger than US investment bank morgan stanley.Bitcoin value dollars at the start of the year it was just $15bn. Ethereum, the second-biggest cryptocurrency, is now worth almost $30 bn.

“if the supply is truly fixed then the price of these securities are determined purely by demand which, in turn, is determined largely by sentiment,” said ken dickson, investment director, money markets and FX at aberdeen standard investments.

“this means huge price swings with bubbles, booms and busts. Unless the supply processes of these instruments are reformed then it is unlikely that they will play any part of an investment portfolio,” he said.

Bitcoin has been on a rollercoaster ride this year. After hitting what was then a record high just below $5,000 in early september it lost about a third of its value in less than two weeks. It has since almost doubled in price again, to new highs near $6,000.Bitcoin value dollars

Ethereum has been even more erratic. Its price surged almost 50 times from the start of the year to june, before falling back by about a fifth, according to industry website coindesk.

That kind of volatility means committees at institutional investment firms looking at the relative risks of asset classes are likely to rule out cryptocurrencies, asset managers said.

“your risk-budgeting committee will say: you can’t hold a lot of that because of the amount it increases risk in your portfolio,” said mr butterfill. “I do expect volatility to decrease over time but risk budget teams tend to look historically.”

EARLY DAYS

For now, those investing in crypto funds are high-net worth individuals, companies managing money for wealthy families, private wealth managers and some venture capital investors.

Bitcoin value dollars

“it’s clear there’s money piling into these funds,” said emad mostaque, co-chief investment officer at the london office of south african hedge fund firm capricorn fund managers. “there’s just not that institutional investor comfort yet.”

Alistair milne, co-founder of the mayfair-based altana digital currency fund, likens investment in crypto funds to the start of the hedge fund boom in the early 1990s, when wealthy individuals were the first to invest in a raft of new funds making high returns.

“it always starts with the high-net worth individuals,” he said. “it wasn’t until 2004-2005 that institutional investors started getting involved in those.”

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Trinity mirror stated on friday that it was buying all of richard desmond‘s northern shell’s publishing assets for £126.7m.

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• 2/7

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Samsung heir jay Y lee was freed from jail on monday. He was convicted for corruption and embezzlement with south korea’s former president in 2017.

• 4/7

The total number of electric buses in service is forecast to more than triple, from 386,000 last year to about 1.2 million in 2025, equal to about 47 per cent of the worldwide city bus fleet, according to a report from bloomberg new energy finance

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Aldi has removed thousands of kilos of vegetables after a customer complained that she had found part of a rat in one bag of frozen mixed greens.Bitcoin value dollars it came after aldi customer pat batemen complained to the budget supermarket chain and was offered £30 compensation, a figure she said was later increased to £500.

• 6/7

Coronation street is set to get its own co-op supermarket and costa coffee branch in a landmark deal that will see shop fronts appearing on a show as product placements.

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Co-op’s and costa coffee’s facades will be seen on the show, alongside branded posters, bags and cups used by coronation street characters.

• 7/7

John lewis, MS, next, debenhams and sainsbury’s are all yet to add their names to a list of brands binding themselves to bangladesh’s latest laws on fire and building safety.

The renewed agreement will see greater investment in health and safety checks come into effect this year as the original 2013 agreement is due to expire in may.Bitcoin value dollars

REUTERS

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