Crypto has grown to become a $2.7 trillion asset class, with Bitcoin, Ether and DeFi attracting more institutional interest.
The career risk surrounding cryptocurrency is shifting to money managers who don’t have exposure to digital assets as opposed to those who are already invested, highlighting a dramatic shift in the institutional acceptance of Bitcoin (BTC) and decentralized finance, according to Bloomberg’s senior commodity strategist Mike McGlone.
The November edition of Bloomberg’s Crypto Outlook described 2021 as just another foundation year for the cryptocurrency market, further underscoring the long-term value proposition of digital assets. In this environment, money managers “risk falling behind and underperforming peers who own crypto assets,” wrote McGlone, adding:
“Our graphic depicts the 200%-plus outperformance of the Bloomberg Galaxy Crypto and DeFi indexes in 2021 vs. the S&P 500.”
Although crypto exhibits much higher volatility than traditional investments, selloffs in assets such as Bitcoin and Ether (ETH) “appear to be attracting responsive buyers, most of which face the potential of falling behind by avoiding crypto allocations.”
Bull markets are about positive dangling carrots and we see plenty ahead for #Bitcoin and #Ethereum. The launch of Bitcoin ETFs in the U.S. appears as an iteration to get to what may better facilitate most investors -- ETFs tracking the crypto market, like the S&P 500. pic.twitter.com/xMQtBdQ5nA— Mike McGlone (@mikemcglone11) October 25, 2021
McGlone further explained that “managers are expected to catch big trends ahead of the masses,” a feat that becomes much more difficult if they rely on traditional portfolio strategies, such as allocating 60% to equities and 40% to bonds. Many wealth managers have warned that the traditional 60–40 portfolio is no longer sufficient in today's market.
As Cointelegraph reported in early October, McGlone correctly predicted the early stages of Bitcoin’s fourth-quarter breakout, arguing that the $50,000 resistance had likely flipped to support. The analyst said $100,000 BTC was in play for 2021 — a view that was reiterated in the latest report.
At the time of writing, the flagship cryptocurrency was worth $62,080, according to Cointelegraph Markets Pro. Bitcoin peaked above $67,000 in October before correcting lower.
Investment managers and financial advisers are expected to play a bigger role in the cryptocurrency market, according to Grayscale’s Michael Sonnenshein, Amber Group’s Jeffrey Wang and Tyr Capital’s Edouard Hindi. In the first quarter, Cointelegraph interviewed the three executives to gauge institutional interest in crypto investments. In their view, the “career risk” of investing in crypto had diminished considerably. The final domino, according to Edouard Hindi, could be fiduciary standards:
“Now that custody and regulatory barriers are slowly dropping, what could still be hindering a broader adoption of crypto by financial advisors is the perception that ‘fiduciary standards’ remain a challenge in openly advocating for the asset class to be included in customers’ portfolios.”