Banks and traditional asset managers used to stay away from Bitcoin and other cryptocurrencies, fearing for their reputation and scared of lack of regulation and wild volatility. However, the recent performance proved that Bitcoin should not be ignored.
Crypto Funds Returned 6% More than Traditional Hedge Funds
A recent survey carried out by Eurekahedge found that dedicated crypto funds returned over 16% last year. Elsewhere, Hedge Fund Research (HFR) said that traditional hedge fund strategies returned 10.4% for the same period.
Galaxy Digital’s asset management boss Steve Kurz told the Financial Times (FT):
Bitcoin has a higher return on a one, three and 10-year basis than any other asset class. When the returns are so high, investors will have to pile in.
So far, no major bank has developed a specialized desk to trade Bitcoin and other cryptocurrencies on behalf of customers. Banks and asset managers have been worried that another correction similar to the 2018 bearish mood could hurt their investments.
However, as the Bitcoin price continues to move higher, more institutional investors are thinking about allocation a portion of their portfolios to cryptocurrencies.
CME and Cboe Opened the Doors to Wall Street, But More Investors Eye Bitcoin
At the end of 2017, Chicago-based CME and Cboe launched their Bitcoin futures contracts, bringing cryptocurrencies into the mainstream. Meanwhile, Wall Street investors started to look into establishing dedicated crypto investment services. For instance, former Goldman Sachs executive Michael Novogratz launched Galaxy Digital.
While the interest in Bitcoin faded in 2018, the cryptocurrency surged last year. It is poised to potentially update the all-time highs this year, at least according to several experts. This will ultimately attract many traditional funds and major banks.
Max Boonen, another former Goldman executive who started a crypto trading company, told FT that digital assets, including Bitcoin, will “quickly become part of the investment landscape.”
“There is a lot of fuss around bitcoin but at the end of the day it’s just another asset to trade,” he stated.
Boonen noted that crypto trading spreads have reduced, even though they’re still high when compared to fiat pairs and other traditional markets. Also, the costs for custody and other processes declined as well. Bitcoin has become similar to equities and bonds, Boonen said.
Chris Zuehlke, global head of Cumberland, argued that it was “only a matter of time before traditional banks get involved, perhaps as brokers between customers and liquidity providers like us.”
Do you think Bitcoin will become accepted by traditional funds the same as ETFs and other equities? Share your thoughts in the comments section!
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