There has been a growing interest of pension, hedge and mutual funds in cryptocurrencies, and Blockchain, a cryptocurrency wallet firm is now offering a service to attract the institutional investors to do just that.
With a brand new platform called Blockchain Principal Strategies, institutional investors will now be able to access customized research and will also be able to access market.
This platform will be serving as a ‘matchmaker and direct counterparty to clients, executing trades and managing associated risk’.
Any Big Opportunities for the Early Birds?
With this platform, clients will be able to make direct equity investments in promising startups.
And according to the research conducted by Willis Towers Watson, mutual funds, insurance funds, endowments and foundations, sovereign wealth funds and pension funds now control more than $131 trillion of wealth in the world right now.
So the new Blockchain product is perfectly aimed at the institutional investors. This also allows the company to build on the momentum that has been seen in the past couple of months.
Will this Allow Digital Assets to be Legitimized?
Ari Paul, the Chief Investment Officer of BlockTower Capital, a cryptocurrency investment firm and a former University of Chicago portfolio manager recently told CNBC that, “Even a small dollar amount is legitimizing. If that happens, every family office says, ‘Oh, Yale’s in. That gives us the excuse.”
According to a research paper written by Jim Kyung-Soo Liew who is an assistant professor at the John Hopkins University Carey Business School, suggested that since Bitcoin was uncorrelated to other asset classes or investments, it opens up a new way for investors to diversify their portfolio even more.
High Risk, High Returns Applicable in this Scenario?
Liew’s research paper added that even though the price of the Bitcoin might be highly volatile, the institutional investors stand to gain from a higher Sharpe ratio of 1.176 relative to any traditional asset class.
“We argue that the institutional investor should seriously consider cryptocurrencies for inclusion into their portfolios at the 1-2% allocation range … Although this market is relatively small, with less than $300 billion in market capitalization and has many other weaknesses that investors must take into full account, we believe in the long run that the early institutional adopters will benefit.”
The paper goes on to prove that the institutional investors are under-allocated to Bitcoin and that the optimal allocation would be 1.3% of the portfolio. They reach that number by using standard portfolio optimization tools.