Monday, October 23, 2017

"Big money stays away from booming bitcoin"

Harried reader may have seen this morning's 'Bloomberg Prophets' piece which begins:
"Last week may be remembered as the turning point when cryptocurrencies joined the mainstream financial system, as the clearing and trading platform LedgerX opened for business.
About 20 institutional investors -- including investment banks, asset managers, hedge funds and proprietary-trading shops -- executed bitcoin forward and option trades at narrow spreads and without difficulty. This creates the possibility of large-scale trading among traditional financial institutions supporting both the vastly increased use of the currencies in business and their inclusion as an asset class in investment products from pension funds to hedge funds...."
The writer, former AQR market research head Aaron Brown is quite enthusiastic about LedgerX.
His earlier "Prophets" piece "LedgerX Will Transform Cryptocurrencies" was published last August.

Here's a wider overview of the current institutional state-of-play:

From Reuters, Oct. 22:
Bitcoin is booming, digital currency hedge funds are sprouting at the rate of two a week and the value of all cryptocurrencies has surged tenfold this year to more than $170 billion.

Yet for all the hype, mainstream institutional investors are steering clear of the nascent market, taking the view that it is too lightly regulated, too volatile and too illiquid to risk investing other people’s money in. 

Bitcoin, the biggest and most well-known cryptocurrency, has outperformed all the world’s traditional currencies each year since 2011, except for 2014. But many investors still view it as an opaque, esoteric instrument used by gun-runners and drug-dealers on the Dark Web that should be avoided. 

This year, though, a flood of new hedge funds focused on cryptocurrencies has offered institutional investors who might be unfamiliar with the market a potential route into the world of digital currencies. 

According to Autonomous NEXT, a financial technology research house, 84 so-called crypto hedge funds have been launched this year, taking the total to 110 with about $2.2 billion in assets altogether.
But the fact most of the funds are relatively small with a limited track record - and that cryptocurrency price swings have been so pronounced - means the world’s pension funds, insurance companies and large mutual funds are staying away. 

“While cryptocurrencies are probably here to stay, they are difficult to analyze, wildly volatile and some may be prone to fraud,” said Trevor Greetham at Royal London Asset Management (RLAM), part of the Royal London life insurance company. 

“Diversification is a good thing but that doesn’t mean investing in everything just because it’s there. We favor assets with a long track record in producing returns or reducing risks,” said Greetham, who heads RLAM’s multi asset team....MUCH MORE
July 13
LedgerX, The Cryptocurrency Derivatives and Swaps Platform Brought to You By Google-n-Goldman (GS GOOG)
July 9 
CFTC Approves Swaps and Options Trading In Bitcoin