2017 will go down in the books of history as a time when asset managers thronged to witness 3000 percent average returns from cryptocurrency hedge. But could history repeat itself? Let’s find out.
Financial markets are inclined towards digital assets given recent price surges. Crypto markets are geared towards growth in 2020 and that seems promising. Infact technical indicators suggest bitcoin is heading for a bull run.
Institutional gold rush hyped back in 2017 following bitcoin’s all-time high. Investors and asset managers scrambled for a piece of fortune; while banks and institutions pioneered blockchain startups. Bitcoin retaliated from the all-time high. Dropping by at least 51%. As a result, institutions backed away and they have kept their distance blaming volatility, reputation and regulation risks.
The few institutional investors that remained raked slight profits in both 2018 and 2019. A survey by Eurekahedge, for instance, indicates 16 percent cryptocurrency fund returns in 2019. Showing a bit of contrast with traditional hedge funds 10..4 percent. Closely, it seems institutions are once again showing an appetite for digital assets.
Deutsche Bank published a report at the beginning of the year claiming that cryptocurrencies have “numerous advantages than traditional assets.” The report noted that the situation is likely to attract more people to digital assets. However, I find institutional come back to bitcoin a bit more cunning than strategic. It is more likely that asset managers are showing because of Bitcoin’s stability around the $8,000 and $9,000; than the coin’s promise to grow.
Meanwhile, Bitcoin price is still moving higher. Bitcoin posted a 31 percent upward correction in January this year. It is unlikely for Bitcoin to attain the 3000 percent bull run and Market analysts know this. Nonetheless, the fact is investors will always pile up once prices increase. Institutions might be wary this time since they’ve been bitten before. But its unlikely the risk of opportunity would make them hesitate from the profit rich cryptocurrency market.
According to Investopedia, crypto asset management is the next phase of financial investment. Ten years since the inception of Bitcoin, crypto market management has become simple and exciting. Investopedia highlighted the following as key takeaways in the race to crypto asset management:
- Investors are much willing to diversify their portfolios by adding cryptocurrency. Asset managers believe they can capture the potential advantages of digital assets.
- Cryptocurrencies are however difficult to adopt. Ordinary investors and new adopters might lack the skills to handle the technology.
- This is why technology firms and financial firms are collaborating to create crypto asset management solutions. The solutions will enable firms and individuals to reap the full benefits of cryptocurrencies.
Meanwhile, bitcoin and cryptocurrencies have become mainstream investments. They present a profitable investment opportunity just like bonds and equity. Traders believe in more days ahead of profitable trading. Although the lack of risk mitigation tools remains to be a huge turnoff, the appeal of crypto-asset funds is simply unavoidable.
Source: FINANCIALTIMES