A time may be coming when ignoring bitcoin will be seen as irresponsible.
“We really believe that we’ll look back five years from now, and it will be deemed fiduciarily imprudent to have zero exposure to digital assets,” Mark Yusko, founder, chief executive officer and chief investment officer of Morgan Creek Capital Management, told MarketWatch in a phone interview late afternoon Wednesday. Some institutional investors are “dabbling” in cryptocurrency while many others have been “evaluating” it, a “euphemism for doing nothing,” said Yusko.
Speaking Wednesday at MarketWatch’s “Investing in Crypto” virtual event series, Hester Peirce of the Securities and Exchange Commission said the U.S. is “behind the curve” in building a regulatory framework for cryptocurrencies. SEC commissioner Peirce said she didn’t know whether the regulator would approve a bitcoin exchange-traded traded fund this year, partly because it’s in transition as Gary Gensler heads toward likely confirmation as the next chairman of the SEC.
“Our view on the ETF is it is going to happen,” Yusko said by phone. “We have invested in one of the asset management groups that has an application on file.”
Morgan Creek, an alternative asset manager based in Chapel Hill, North Carolina, has invested in Bitwise Asset Management, according to Yusko. He said Bitwise was an early applicant for the bitcoin ETF.
The San Francisco-based firm announced in January 2019 that it filed with the SEC for the proposed Bitwise Bitcoin ETF. Bitwise is among several asset managers, including Fidelity and Grayscale Investments, that have applied for an exchange-traded fund focused on the cryptocurrency.
With the bitcoin
market valued around $1 trillion, or about half the total $2 trillion for cryptocurrencies, “you can’t ignore it anymore,” Yusko said. “I really think we are at an inflection point.”
While many investors continue to evaluate bitcoin with reservation about its place in portfolios, Yusko said he has seen rising interest among institutional investors amid the disruption that it’s creating. Crypto performance has been “so strong” that even a small allocation in portfolios can make a big difference — a point Yusko said he sees resonating among university endowments and foundations.
“They’re so competitive with one and other, I think that’s going to drive additional adoption,” he said.
Crypto investing may be at a tipping point, but major asset managers aren’t exactly rushing toward bitcoin with full force. Invesco chief global market strategist Kristina Hooper and Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. SPDR business, each told MarketWatch in phone interviews this week that they view bitcoin as a speculative asset.
“I am of the camp that believes it is very much a speculative investment,” Hooper said Wednesday in a phone interview. The volatility in Bitcoin’s performance makes it “a far riskier” investment than stocks.
was trading around $57,715 on Thursday afternoon, up 2.78 percent. That’s below its record high of about $61,000 in in March.
Meanwhile, U.S. stocks were up Thursday afternoon, as measured by the S&P 500 index. The S&P 500
was trading 0.3% higher, with gains for the year at around 9%, according to FactSet data.
State Street’s Arone said that most investors are holding bitcoin on the hope its price will see a significant jump, whereas the chief motivation for owning an asset like gold
is to hedge against risks such as inflation or political worries.
“You want your store of value to be somewhat stable,” he said in a phone interview. “Well, bitcoin is not stable. It’s quite volatile,” he said, adding that it is much more volatile than stocks, currencies and gold. Arone also said that bitcoin has no real use beyond speculation at this point, but that State Street has been fielding a lot of question on it from clients.
Morgan Creek’s Yusko sees promise in crypto’s future.
“In a world where technology is moving us to a more borderless society, you don’t want to fight the technology,” said Yusko. “You want to be the first embrace it.”
Within crypto, Morgan Creek’s venture fund investments are largely in the equity of businesses providing infrastructure to the industry. About 20 percent may go toward “liquid protocols” including cryptocurrencies, according to Yusko.
The Morgan Creek CIO said his firm is invested in Coinbase Global, the cryptocurrency exchange that reportedly is preparing to go public next week. Coinbase’s direct listing is scheduled for April 14, according to a Wall Street Journal report.
“We’re very excited about the Coinbase direct listing,” Yusko said, adding that Morgan Creek has built a portfolio of the innovative companies in the crypto industry while also putting capital to work in bitcoin.
“We view bitcoin essentially as a late-stage venture investment,” he said. “Instead of buying stock, you actually buy the protocol itself to own the network.”