Saturday, March 2

Bitcoin claims its place in the portfolio of investors

Crypto assets are coming 13 years after the birth of bitcoin

if not to adulthood, yes to adolescence. Regulators are striving not to miss the boat and to approve regulations for this sector, while investors, large and small, show their interest in an asset that has managed to rise in 2021 as one of the favorite values ​​in the face of runaway inflation.

The cryptoactive market has reached a valuation of 2.2 trillion dollars and the virtual currency par excellence, bitcoin, has accumulated an average annual revaluation of 67% over the last eight years, compared to 6.8% for the MSCI World Index . A return with enormous doses of volatility: bitcoin started the year below 30,000 dollars, exceeded 63,000 in April and lost 30,000 again in July. It closes the year on 47,000 dollars.

Seven out of ten institutional investors expect to buy or invest in digital assets in the future and more than 90% of those interested in digital assets expect to include them in their clients’ portfolios in the next five years, according to a survey conducted by Fidelity Digital Asset, a specialized division of the US manager. Crypto-assets thus already have the interest of investors, large and small, and of asset management professionals, who have several questions: what allocation to give them within the portfolios and how and in what to invest specifically .

In the case of bitcoin, at Robeco they point out that “without a solid view of its evolution, an allocation of up to 2% would seem reasonable from the point of view of portfolio risk.” Of course, they add that the high energy consumption that its mining entails –it spends more electricity than a country like Norway– does not make it viable for a sustainable investor.

If deciding what percentage of the portfolio should go to crypto assets, even more complex is deciding how to make it possible. Today, and with no regulation in sight anytime soon, the asset management industry in the eurozone cannot directly buy bitcoins or ethers. There is hardly any offer of investment funds or exchange-traded funds –ETFs or ETPs– specific to this subject, which have the passport to be marketed in the EU, the UCITS casing. At the moment, there are only a handful of exchange-traded funds on crypto assets that have managed to be marketed in Spain by some brokers, either among specialized investors or among small savers. In Europe, according to figures from Morningstar, ETF-linked assets with exposure to crypto assets have exceeded €10.5 billion.

Meanwhile, the big asset management firms are already working to operate in this segment. Fidelity has had a specific division for digital assets for a few years and UBS, Goldman Sachs and Morgan Stanley are already working on an approach to this type of asset for the wealthiest clients. In Spain, Santander plans to launch an ETP linked to cryptocurrencies in mid-2022. And the Swiss subsidiary of BBVA has a custody and sale service for crypto assets.

The solution, for those interested, can then go through investing in companies related to crypto assets and blockchain technology, values ​​that also have high doses of volatility.

Among these values, HIVE Blockchain Technologies stands out, which scores 45% in 2021. It was the first Canadian crypto asset miner to debut on the stock market and its market value rises to 1,000 million dollars. The company has crept into the top positions of the Alcalá Multigestion Orichalco fund, which has increased in value by 67% in the year, and which also has other companies related to blockchain and crypto assets in its portfolio, such as Argo Blockchain, Galaxy Digital Holdings, Bitfarms or the European ETP provider of crypto assets ETC Group.

For a few months it has also been possible to invest in platforms that operate digital assets. Coinbase debuted on the Nasdaq in April and reached a stock market value of 100,000 million dollars – which has been reduced to 55,600 million dollars today. The platform thus surpassed ICE (Intercontinental Exchange), owner of the New York Stock Exchange, and the Nasdaq by capitalization. In the coming months, the arrival of another platform, eToro, is expected to debut on Wall Street through its merger with a SPAC.

Regulation is hard to come by

Europe. The European Commission is working on the development of the MiCA regulation (acronym for markets in crypto-assets) but far from the speed at which the cryptoactive market is growing. The latest draft delays its application for digital assets until well into 2024, while countries such as Germany, France and Luxembourg are scrambling to move forward with their own regulations. A year before, the adoption of this regulation will come for digital currencies referenced to assets (stablecoins) and those of electronic money tokens or e-money tokens. This last market has registered a strong growth this year, going from 24,000 million dollars to 141,000 million, according to Bank of America. The analysis firm bets on Mastercard, Signature, Visa and Western Union as some of the values ​​that will benefit the most.

global regulation. The IMF has recently called for a global regulatory framework on crypto assets to avoid systemic risks to the financial stability of some countries. In the United States, Congress is analyzing a future regulation while the SEC is delaying the approval of several exchange-traded funds linked to bitcoin.