The adoption of cryptocurrencies by institutional investors has grown in recent times. The latest top institution to express its approval for Bitcoin investment is the fixed-income manager, PIMCO. The firm is getting more exposure to crypto-assets following the purchase of crypto-linked securities.
The firm’s Chief Investment Officer Daniel Ivascyn said in an interview the firm already holds various crypto-linked securities held in hedge fund portfolios. He also confirmed the company is looking to increase its exposure to these assets as it follows the trends.
PIMOC is one of the world’s largest asset management companies that focuses on fixed-income securities. It was founded in 1971 and it was controlling more than $2.2T worth of assets as of December 2020.
The news came at a time when Bitcoin is enjoying some positive movement. The token had just surpassed its previous all-time high to hit $67,000 following the approval of the first ETF application by the SEC.
The crypto uptake by institutional investors is an indication that digital currencies have become mainstream.
Institutions and the crypto world
The institutional investors were some of the slowest entities to take up digital currencies investment options. However, the trend is currently changing with several institutions looking to take up digital currencies. The trend is global with pension fund managers in Australia considering Bitcoin investments.
You might be wondering what might have changed?
The institutional managers are some of the most shrewd investors. They are always looking for ways to ensure they get the best returns without risking the holder’s money. Given the high regulations, they would rather have lesser returns compared to risk.
The main reason most institutions were never willing to take up Bitcoin was the volatility and lack of regulations. The volatile crypto market meant any investor could never be assured of how much their assets are worth, as the markets would shift within seconds. This would not work perfectly with the institutions who believe in keeping updated books of accounts. It would require too many changes on the books to keep up.
With the regulations, it was never assured whether the governments would embrace or ban digital currencies.
A few months later, the digital currency landscape changed significantly. Even though cryptos are yet to attain the needed stability, the markets have become predictable and easy to analyse. The various investment options also allow one to choose the less volatile assets like stablecoins and crypto derivatives.
Crypto regulations have since become clearer with the US FED confirming that they do not have plans to ban cryptocurrencies. At the same time, any new regulations are most likely to be about defining the various aspects of the industry and not doing away with them.
With the traditional stock market performing badly, the institutions are looking for alternative investment options. Right now digital currencies are proving to be the best option. More institutions will keep joining the crypto industry. Still, given the volatility risk that remains, they can only invest a little part of their assets, typically 5%.