Funding Large Alliance Amber now says Bitcoin has a task in investor portfolios
The New York-based research arm of AllianceBernstein, a global investment manager with $ 631 billion in assets under management, has changed its mind about bitcoin as an investment asset.
In a research report prepared for clients by CoinDesk, Inigo Fraser Jenkins, co-head of the portfolio strategy team at Bernstein Research, said the company excluded Bitcoin as a fixed asset back in January 2018, shortly after Bitcoin hit its all-time high near $ 20,000.
However, post-pandemic changes in the political environment, debt and diversification options for investors mean that the asset manager must now play a role in asset allocation, at least in the long term [Bitcoin].
Fraser Jenkins said the "significant reduction" in the volatility of Bitcoin price made it more attractive both as a store of value and as a medium of exchange. The pandemic has also increased the correlation of Bitcoin with other major assets. On the other hand, he said, Bitcoin is a liquid asset and can be sold quickly, as happened during the market crash in March.
"From a narrow empirical point of view, Bitcoin's downward shift [volatility] makes it more desirable, but its increased correlation points the other way," wrote Fraser Jenkins.
When it comes to a role in hedging against inflation, "Bitcoin's driver is similar to gold," the Note said, even though the cryptocurrency may not "move precisely to counter inflation in a given fiat currency counteracts. " . ”
Other issues such as the use of cryptocurrency in crime and the high energy consumption of bitcoin mining have been cited as asset concerns, as has increased government scrutiny.
According to Fraser Jenkins, there could still be potential problems with Bitcoin in the future. With the pandemic likely to make governments more powerful and play a bigger role in managing economies, if cryptocurrencies get much larger than they are today, they can become "a nuisance to policymakers".
"Cryptos have a place in the asset allocation … as long as they are legal!" he said.
Ultimately, Bernstein Research recommends that Bitcoin can account for 1.5% to 10% of portfolios depending on the monthly return on the cryptocurrency.
"The resulting allocation to Bitcoin is small, but within this simple optimization framework the allocation to some other asset classes is zero. In this context, Bitcoin appears to be empirically potentially significant," wrote Fraser Jenkins.