For years now, Bitcoin investors have been saying that once the money managers and institutional investors of the world take up positions in in the crypto asset, the price will soar to levels currently unthinkable. However, such an influx of capital is yet to occur.
For at least one digital currency analyst, this is “odd”, particularly given how different stocks perform for investors. Meltem Demirors says that investments should be made based on people’s perception of the future and that Bitcoin will central to the future of finance.
Since Most Most Stocks Are Poor Investments, Why Don’t Money Managers Take a Chance on Bitcoin?
In a Twitter thread posted earlier today, CoinShares Group Chief Strategy Officer said that she found the lack of risk taking by investment professionals “odd”. Demirors pointed out that stock in less than one percent of companies drives more than three quarters of the entire stock market’s returns. Meanwhile, a large number of investments simply lose money.
1/ people have such odd views on investing!
less than 1% of stocks drive more than 75% of stock market returns. over half of all stocks underperform the risk-free rate (US treasuries), and many lose money.
the top 10 co’s account for >50% of wealth created in the last 10 years.
— Meltem Demirors (@Melt_Dem) December 30, 2019
Demirors pointed out that picking individual stocks is tough, leading to an approach that favours investing in sectors rather than specific companies. Even those sectors performing spectacularly well over the last decade, such as tech or financials, only managed between 400 and 600 percent over the ten year period.
Given the apparent lack of investment opportunity, the CoinShares CSO said that she finds the lack of capital allocation to Bitcoin and cryptocurrency from investment professionals puzzling. For her, investors should be basing decisions on their perspective of the future. She added:
“I believe Bitcoin is a massively important part of the future.”
However, being an entirely new asset class, investing in Bitcoin still appears to be much too risky even for the tiny percentage allocation Demirors alludes to in her thread. Investment professionals are not only in the business of making money for clients, they are also keen not to be seen to be losing money too. Professional money managers would still rather play it safe than become known as “the company that lost all that money on Bitcoin”.
There are plenty of risks still associated with the Bitcoin and cryptocurrency industry. Chief amongst these is, of course, volatility. However, there is also still a risk associated with custody of digital assets, and the changing regulatory landscape.
High profile examples of exchanges being hacked and customers losing funds, coupled with a general lack of understanding of the asset, exacerbate the perceived risk, further reducing the desire for a money manager to stick their head over the proverbial precipice. Similarly, the hostility expressed by key members of the US and other governments towards the industry will also put money managers off.
That said, we’re sure that next year will “be the year the institutional investors enter the market”. Who knows, perhaps this time it will be.
Related Reading: Bitcoin Price to Soon Go Parabolic? Analysts Say It’s Possible
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