Adoption by mainstream finance industry remains in question, executives say
The recent volatility in bitcoin prices triggered by Tesla’s Elon Musk has raised new doubts among institutional fund managers over the future of cryptocurrencies as an asset class.
UBS Wealth Management, Pimco, T Rowe Price and Glenmede Investment Management were among the firms that have expressed reservations in recent days about the potential of cryptocurrency investments.
The upheaval came after Tesla said it would no longer accept payment in bitcoin for its electric vehicles owing to environmental concerns, and Musk jokingly referred to dogecoin, a rival cryptocurrency, as a “hustle” during an appearance on the Saturday Night Live television show.
“Our stance with clients is the 10-foot pole rule: stay away from it,” said Jason Pride, chief investment officer of private wealth at Glenmede. “I don’t think the Fed and other regulators are fans of the current market structure for cryptocurrencies.”
Rob Sharps, president and head of investments at T Rowe Price, told the Financial Times: “Crypto has an impact across capital markets, and we’re capital markets experts. Ultimately, the mandates we manage for clients are not well suited for investing in cryptocurrencies, and we recognise the high level of speculation in this space.”
Highlighting the extreme volatility, bitcoin traded at just above $44,000 on Monday, down about $20,000 from the record high it hit just a month ago. The latest tumult was sparked by Musk seeming to imply on Twitter that Tesla has or will sell the stake it has accumulated in bitcoin. He later clarified that the automaker “has not sold any bitcoin”.
To be sure, bitcoin has gained ground with investors in recent years and trading in futures contracts has become more liquid. US regulators are also considering whether to approve crypto exchange traded funds.
But asset managers say they are troubled by signs that cryptocurrencies are failing to live up to expectations that they would become less volatile over time or offer investors hedges against equity turbulence or inflation.
“The volatility of crypto is stratospherically high and we often see that, when equities sell off, so does bitcoin and that means it is not a good portfolio diversifier,” Pride said....
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