Money managers who have avoided the many ups and downs of cryptocurrencies might be feeling relieved for having done so, a senior investment strategist at JPMorgan Asset Management said.
“As an asset class, crypto is effectively nonexistent for most large institutional investors,” Jared Gross, head of institutional portfolio strategy at the company, said on last week’s episode of Bloomberg’s What Goes Up podcast.
“The volatility is too high, the lack of an intrinsic return that you can point to makes it very challenging,” he said.
Photo: Paul Yeung, Bloomberg
In the past, there used to be some hope that bitcoin could be a form of digital gold or haven asset that could provide inflation protection, but it is “self-evident” that has not really happened, Gross said.
“Most institutional investors probably are breathing a sigh of relief that they didn’t jump into that market and are probably not going to be doing so anytime soon,” he said.
Cryptocurrency prices rallied in 2020 and last year, boosted in part by a number of traditional finance players getting into the space or at least voicing support for it.
That was an important development for cryptocurrency enthusiasts, who saw that type of embrace as giving credence to the nascent industry, but digital assets have suffered mightily this year as the US Federal Reserve and other major central banks have raised interest rates to fight inflation.
FALLING PRICES
Such a less-accommodative environment has been deleterious to cryptocurrency.
Bitcoin, the largest token, has shed 60 percent of its value this year and ether has tumbled about 70 percent.
Meanwhile, the decades-long trend of globalization has come to an end and the fracturing of geopolitics would have huge implications for capital markets and investing next year, Gross said on the podcast, which also discussed how everything from supply chains to industrial policy, energy and defense would feel the impact from globalization’s demise.
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