Investors are increasingly turning their attention to cryptocurrencies, evident from various surveys and stories reported by Pensions & Investments since the start of the year. To read more, go to pionline.com/crypto21.
Orange County eyeing cryptocurrency: Orange County Employees Retirement System, Santa Ana, Calif., is researching blockchain and cryptocurrency, OCERS’ CIO Molly A. Murphy said at the $19.8 billion pension fund’s March 24 investment committee meeting.
“It’s not an investible idea at this point,” Ms. Murphy said. But the topic has stayed in everybody’s thoughts, she said, noting that Federal Reserve Chairman Jerome Powell had called it a speculative currency in recent congressional testimony, she said.
Ms. Murphy added it’s good to know why people choose cryptocurrency as an alternative to traditional currency and what impact it will have on traditional currency.
Some 85% of European investors and managers with an existing bitcoin exposure plan to increase their investments over the next two years, according to a survey of 50 institutional investors and 50 wealth managers with a combined $110 billion in assets, conducted in January by cryptoassets hedge fund firm Nickel Digital Asset Management.
The survey didn’t note the breakdown of assets among institutional investors and wealth managers. All of the investors and managers already had some allocation to bitcoin, a Nickel spokesman said.
In terms of what makes bitcoin, the world’s largest cryptocurrency, attractive, survey respondents said they anticipate growth in bitcoin’s valuation over the next two years. They also said bitcoin can provide a tail hedge against excess monetary supply and the risk of decline in the value of government-backed currencies caused by the COVID-19 crisis.
Fifty-eight percent of investors surveyed by J.P. Morgan Chase & Co. in January said they believe cryptocurrencies are “here to stay,” while another 21% identified cryptocurrencies as a “temporary fad,” and 14% said they are something to avoid. The remaining 7% of survey respondents said they believe crypotocurrencies will become “one of the most important assets” for investors.
While the majority of survey respondents believe cryptocurrencies having staying power, only a small portion of survey respondents (11%) reported that their firms invest in or trade cryptocurrencies. Of the 89% of investors that said their firms do not invest in or trade cryptocurrencies, 22% said they are likely to start. At the same time, 77% of investors said they expect tighter regulations around cryptocurrencies, with 97% believing fraud is somewhat or very prevalent. Between 200 to 300 investors were surveyed at a J.P. Morgan conference in January.
Sixty-one percent of investors expect their digital-asset holdings to increase in the next 12 to 24 months, according to a Goldman Sachs Group Inc.
Goldman Sachs surveyed 280 of the firm’s clients in early March, which included pension funds and sovereign wealth funds, corporations, , insurance , macro funds, asset managers, hedge funds and banks, among others.
Among the survey’s total respondents, 40% reported having exposure to cryptocurrencies.
The survey also found that 34% of investors believe regulation/internal investment/mandate permissions are the greatest hurdles to start allocating to digital assets, while 24% identified a lack of well-regulated, investible assets as the biggest hurdle. Additionally, 35% of respondents said they believe spot pricing and volumes data would be the most helpful to better evaluate potential investments in cryptocurrencies.
Even with cryptocurrency exchange-traded products already available in Europe and Canada, a U.S.-listed product could send a shock wave through the investing world.
“It will be the single most important force in driving down the cost of investing in cryptocurrency,” said Matt Hougan, chief investment officer at Bitwise Asset Management. The advent of a U.S. ETF and the associated investor protections will ultimately “bring more liquidity, more utility and more adoption to crypto,” Mr. Hougan said.