Cambridge Associates, a pensions and endowments adviser says more institutional investors should invest in Bitcoin and other cryptocurrencies. Analysts at the Boston-based advisory firm the emerging asset class has the potential to cause a paradigm shift in the established digital world. Thus, big-money players stand the chance of gaining first-mover advantage by claiming significant positions on virtual currency investments.
Bitcoin is Developing, Not Faltering
According to Bloomberg, the firm issued a note to its clients on Monday (February 18, 20190 urging them to consider Bitcoin investment funds. Analysts at Cambridge Associates say crypto-focused investments could potentially reap huge rewards for institutional investors.
The company says the risks associated with Bitcoin and other virtual currencies shouldn’t dissuade big-money players from putting up equity in the market. Throughout 2018, cryptocurrencies endured a prolonged bear market that caused prices to plummet by more than 80 percent.
Commenting on the matter in the note to clients, Cambridge Associates analysts said:
“The dramatic declines that swept across the crypto space raised questions about the future of these assets and the blockchain technology that underpins them. Yet, in looking across the investment landscape, we see an industry that is developing, not faltering.”
However, while cryptocurrency investments have the potential to produce massive returns, the firm says institutional investors shouldn’t jump in head first without carrying out due diligence. According to the analysts, pension funds, endowments, family offices, and other big-money players should obtain adequate information about the industry before deciding on which investments to make.
While still in its infancy, the cryptocurrency ecosystem continues to evolve, spawning different investment avenues. From spot trading on exchange platforms to futures contracts and even illiquid venture funds, there are numerous options for institutional investors.
Some Big-Money Players Already Invested in Cryptocurrency
Already, some institutions have invested significantly in cryptocurrencies. In February 2019, Morgan Creek Digital announced that it had secured investments from two public pension funds based in Fairfax County, Virginia. These two funds are the first public pension plans to invest in cryptocurrencies.
On Monday, Blockonomi reported that big-money investors make up the majority of the revenue inflow for Grayscale Investments, a virtual currency asset management firm. According to the company’s annual report, institutional investors contributed 66 percent of its inflows for the entire 2018.
Stakeholders like Tom Lee say 2019 could be a watershed year for the emerging cryptocurrency landscape as a whole. These commentators say while there might not be a massive price rally, different projects are laying the groundwork for the establishment of the market on a more robust footing.
The Market Needs Improved Legitimacy
However, if the wave of institutional investors that continues to be the clamor for many cryptocurrency enthusiasts is ever going to materialize, many commentators say the industry needs improved legitimacy. Thus, issues like price manipulation, ICO scams, and other fraudulent activities need to be eradicated or at least minimized.
Robust custody tools and market manipulation continue to be prominent pain points for the market as a whole. In January, Fidelity Investments announced that it would launch its cryptocurrency custodial service in March 2019. Nasdaq also recently announced a partnership with Brave New Coin (BNC) to offer real-time price indices for Bitcoin and Ethereum.
In a recent interview with Forbes, Alex Sunnarborg, managing partner at Tetras Capital, a cryptocurrency hedge fund management firm, says the launch of services like Fidelity and Bakkt will be pivotal to the status of the industry as a whole. The entry of such reputable mainstream players could introduce sweeping changes in the legitimacy of virtual currency market data.
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