DBS: Now's Not the Time to Be Taking Risky Bets With Crypto

With an impending recession on the horizon, it’s currently “not the time to be taking crazy/risky bets with cryptocurrency,” DBS investment strategist Daryl Ho said at the bank’s 4Q22 CIO Market Outlook media briefing on Thursday.

Hou Wey Fook, DBS’ chief investment officer, previously said that Bitcoin presents an “opportunity that money cannot buy,” because Fiat monetary systems are still governed by central banks.

Bitcoin is no longer seen as a portfolio hedge, given that it has recently been trading in line with equity markets, and its high volatility presents risks to investors, but DBS, Singapore’s largest bank, says that the OG cryptocurrency is “still unique” and that “opportunities are there.”

“With our more cautious kind of approach towards Bitcoin and Ethereum, with higher volatility, can still see some challenges… but it is the technology that it offers is still an opportunity,” Ho said.

The price of Bitcoin has fallen by some 60% this year to around US$19,000 from a high of over US$47,000 in March. Comparatively, gold is down by 11%, while equities and bonds are down 19% and 25% on average, respectively. The Fed has made five rate hikes totalling 300 bps since March.

The Russia-Ukraine war is a case in point, as Bitcoin and other crypto markets allowed investors there to raise cash and liquidity when exchanges/stock markets were closed to them.

“I think that’s the opportunity it presents. Whether the price fluctuates are not, it’s not up to us,” Ho said during the media briefing, adding “I think that opportunity is still there because the Bitcoin network has survived hacks, forks and several other crisis-level events.”

DBS’ trading arm Vickers holds a crypto trading license from the Monetary Authority of Singapore. Last month, the bank said it would be rolling out self-directed crypto trading via DBS digibank for “wealth clients who are accredited investors” to trade cryptocurrencies on the DBS Digital Exchange, or DDEx.

Market outlook

Hou addressed concerns of an impending recession, saying the bank “does not see the recession to be deep, nor for long,” saying US consumers “remain resilient” and that factors contributing to worries over heightened inflation “will normalise soon.”

The bank said it sees opportunities in big tech, medical devices and luxury sectors, but is neutral weight on equities, underweight bonds and overweight on alts. Hou recommended investors to stay in the market by dollar cost averaging and to focus on quality.

“We continue to advocate for portfolios to hold high quality bonds and stocks. For those with high cash levels, adopt a “dollar-cost average” approach to add A/BBB-rated bonds that are currently trading north of 5% as income generators in our barbell portfolio strategy. For secular growth equities, I.D.E.A. companies (Innovators, Disruptors, Enablers, Adapters) currently offer valuation buffers,” DBS said.