What do institutional investors think about #Bitcoin – Research Highlights

Editorial Team OpinioPro
By March 26, 2021 10:11

What do institutional investors think about #Bitcoin – Research Highlights

What do institutional investors think about #Bitcoin – Research Highlights

During the week of 15 of March, the bitcoin is nearing a new record high of 60.000 U.S. dollar. This unprecedented rise in price begs to wonder, what do institutional investors think about Bitcoin. In this article some of the opinions of institutional investors on bitcoin and cryptocurrencies in general will be shared.

In a recent publication by Pictet Asset Management called: “The secrets of bitcoin” the pros and cons of bitcoin are discussed. Pictet AM states that it is not a coincidence that there is a recent surge in interest in bitcoin with inflationary pressures rising, due to cryptocurrencies becoming a barometer of the sentiment on aggressive monetary policy. Next to cryptocurrencies becoming a barometer, they also state that distrust against government surveillance is increasing due to everything being online, which is in favour of cryptocurrencies.

The attraction of bitcoin is also increasing due to a number of reasons according to Pictet AM. Due to the low opportunity costs of interest, the increasing usage of bitcoin as a means of currency, and the introduction of a futures market, the liquidity of bitcoin should increase.

Even though the liquidity is increasing, the road towards ‘regular’ trade is still long according to Pictet AM. The usage of bitcoin is still cumbersome, its actual usage as a means of currency is still small and a lot of users forgot their password or have hardware problems which makes them lose their bitcoin.

Another issue for investors is the fact that Bitcoin is impossible to value due to it not being related to an underlying asset according to them. Pictet AM concludes that even though crypto reaches the headlines of newspapers, it is too risky to ever become a mainstream asset, let alone replace the dollar.

Secondly, we look at a recent paper published by Farringdon Capital Management which tries to add some objectivity to the bull arguments that are mostly used by bitcoin investors.

Farringdon CM states that the idea that bitcoin is a better version of money does not do right to the nature of bitcoin and money. Bitcoin is a commodity and money is debt. Furthermore, the loss in value of currencies due to inflation has historically been offset by the compensation that investors receive in the form of interest.

Finally, Farringdon CM argues that the environmental impact of the large energy usage has mostly been ignored. According to them, there is potential for a large win at barely any cost for the environment.

Finally, we look at an article by BNP Paribas Asset Management named “What is the problem with cryptocurrency (bitcoin)?. Due to reasons such as the fact that bitcoin does not legally qualify as money due to the difficulty of its usage, the missing element of an income stream that regular financial assets show, and it not showing the features of a store of value.

Chi Lo from BNP Paribas AM expects that prices of cryptocurrencies will eventually crash which could be triggered by a change in regulation, monetary policy or due to the prices being inflated that much that marginal buyers are priced out of the market.

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Editorial Team OpinioPro
By March 26, 2021 10:11

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