Business is booming for Bitcoin since the recent weeks with the value of a single Bitcoin well within reach of the $6,000 US Dollar mark. Cryptocurrencies in general are doing great business right now with the value of all cryptocurrencies increasing times ten this year to over $170 billion USD worth.
Bitcoin is the most popular cryptocurrency and the most successful right now. It has out-performed all forms of currencies since the year 2011 till date except only for the tear 2014. In spite of its meteoric rise in value, many investors still are not sold on the digital currency. They see it as an opaque tool used by illegal traffickers, gun-runners and drug-dealers on the Dark Web. Even if you don’t look at its utility for illicit activities, the fact that it is way too lightly regulated, volatile and illiquid makes it a big risk to invest into.
This year has however, seen a rise in the number of hedge funds that are focused solely on cryptocurrencies. They’re providing institutional investors who might not even have a good idea about cryptocurrencies the opportunity to get into the cryptocurrency game. According to Autonomous NEXT, a financial tech research house, the total number of crypto-hedge funds that have been launched so far this year number at 84 making it a total of 110. The total combined asset of these hedge funds is now about $2.2 billion USD.
Most of these funds are relatively very small and have a limited track record. The fact that cryptocurrencies have this tendency to have huge variations in their value without much warning is not very good either. These factors are keeping all the big money investors safely away from cryptocurrencies.
Here to Stay But Prone to Fraud
Trevor Greetham at the Royal London Asset Management is part of the Royal Life insurance company. He believes that even though cryptocurrencies are probably here to stay, they are utterly volatile, cannot be analyzed and some of them may even be prone to fraud. Diversification is a good practice while investing but that doesn’t mean you should invest in anything and everything in front of you just because it exists. Greetham heads RLAM’s multi asset team and says that they’d rather invest into assets that have a long and reliable track record in producing good returns on investment or are able to reduce risks.
There is an anonymous skeptic of cryptocurrencies who happens to be a banker at one of the major European banks. He believes that even though mainstream money managers can actually get into the cryptocurrency market by investing in a huge basket of hedge funds with one of them being a crypto fund but it is a very controversial proposition to make. It is highly unlikely for the more established hedge funds to invest into this volatile venture because it would be risking their core business.
Whether or not Bitcoin proves itself as more than a speculative bubble, it seems that the real big money investors will stay away from the cryptocurrency world despite the continuous success Bitcoin has seen.