"Buy More Bitcoin": Forget Traditional Allocations, Add BTC, Say Asset Managers

As the final touches are being applied to brn, our research platform that paves the way for more informed digital asset investment strategies, we're considering the extent to which traditional allocations should be completely revamped for cryptocurrency.

According to a Blockhead survey of asset managers, research analysts, and investors, the traditional recommendation of a 60:30:10 investment split strategy is causing a lot of heartache in globally balanced funds.

While their stock portfolio has performed well, their fixed income proportion has yet to take off. With evidence that global central banks have more or less pivoted away from an aggressive tightening bias, the outlook for bonds remains bleak.

On the other hand, Bitcoin's performance over the past year has taken investors by surprise. Up almost 150% over the year, Bitcoin has already superseded its 2021 all-time high.

Power of FOMO

If crypto investments are not part of their balanced portfolios, FOMO is already kicking in, according to about 20 respondents to an additional question in our quarterly crypto survey.

The survey results scream investors' enthusiasm for adding cryptocurrencies to their assets even at these record levels.

They are even calling for as large a proportion of 8% in global balanced funds, which is rather high for traditional long-term investors.

Generally, the proportion of other assets is less than 10%, but the spot Bitcoin ETF approval has changed the game for digital assets, especially for the largest cryptocurrency.

This comes despite the naysayers calling the top crypto token a speculative bet rather than an asset of value.

Insti-gating

Institutional investors are seeing cryptos in a completely different light now, with almost every respondent Blockhead spoke to calling for either jumping into the asset if they are not already doing so or penciling it into a higher proportion of their portfolios.

"Buy more Bitcoin. And if Bitcoin's returns do not entice you, then you have lost a footing as an institutional investor," said the chief investment officer at a large asset management firm in Boston.

"The need to diversify has been trending for the past few years, and despite the so-called 'crypto winter' - Bitcoin has been an asset of value. The ETFs make them even more lucrative to add to investment portfolios as traditional assets," added the CIO.

In March, institutional trading activity on the CME reached a staggering $155 billion, marking a remarkable 60.6% increase and setting a new record.

The survey indicated that Bitcoin futures played a substantial role in the surge of trading volume, which saw a remarkable 65.4% increase to reach $123 billion per month.

While cryptos have largely been extremely volatile within short trading periods, the long-term trends point to value add, which is the USP of institutional investors.

Even the recommendations from global balanced funds show a clear plan for adding top crypto tokens to their assets under management.

Bitcoin ETFs have made crypto investments even more enticing, especially as the top global fund house, BlackRock, has launched various products.

"Despite the differences in economic backgrounds and central banks' hesitance to lower interest rates, the risk rally has continued to grow. Just like the Goldilocks phenomenon, government bonds, equities, and cryptos have decoupled," said the head of investments at a large asset management firm in Hong Kong.

However, respondents pointed to the necessity for efficient regulation as one of several difficulties and risks that have risen due to the exponential expansion of cryptocurrencies.

"To keep illegal activity at bay as the business develops and innovates, finding the sweet spot of regulation or what we call the 'Goldilocks zone' is essential," said an investment advisor at a fund house in London.

"Successful regulation of cryptos requires international collaboration, which is promising given recent suggestions at the G20 and G7 summits. Countries must maintain their collaboration and, more importantly, help investors with clarity," added the investment advisor.