Amid a broad swathe of positive developments in the blockchain and cryptocurrency space, and with regulatory sentiment emerging as broadly moderate, an authoritative voice has predicted doom for digital coins.
BlackRock’s global chief investment strategist, Richard Turnill, is hoping investors in virtual currencies are ready to “stomach potentially complete losses.” Turnill’s voice carries, as it comes from the largest asset management concern in the world.
More Caution Than Doom
Turnhill did allow himself a get out of jail free card by saying “We don’t see them becoming part of mainstream investment portfolios soon,” he acknowledged that they could be more widely accepted and mainstream in the future.
Turnhill pointed to virtual currencies’ extreme volatility, lack of cohesion and regulatory control as making them fringe assets for the common investor. He noted that their potential for breathtaking highs and lows makes the traditional market peaks and slumps “almost look placid.”
In many ways, simply echoing the hale truth that a person shouldn’t invest what they can’t afford to lose, for Turnhill the prospect of such huge losses precludes cryptocurrencies’ admission to the ranks of suitable investments. The BlackRock Investment Institute report was published as part of the ongoing market analysis.
At some future point in more mature markets, cryptocurrencies may become stable assets to be invested in, but for now, they’re staying off BlackRock’s books.
For one thing, Turnhill dislikes the fact that cryptocurrencies haven’t performed as a hedge or offset against waning stock fortunes. Looking at the traditional argument for a percentage of a portfolio containing virtual currencies that stand apart from typical stock woes, Turnhill pointed out that had not proven to be the case.
Digital currency investment had failed to protect investors from stock losses elsewhere in their portfolios.
Another heavyweight concurred with a February 9, 2018, report from JP Morgan Securities. Author John Normand stated that cryptocurrencies had “no ability to mitigate portfolio drawdown during periods of acute market stress, like equity flash crashes of August 2015 and February 2018.”
Still a Pariah, Time Will Tell
The omnipresent Bitcoin has epitomized the unpredictable highs and lows of cryptocurrency investment, rising to just under a delirious $20,000 from an initial value of $0.06 a few years ago.
Spurred by the highs, Cboe and CME, the world’s largest futures exchange, launched Bitcoin futures in December 2017.
Users were anticipating ensuing formalization of Bitcoin and others as becoming mainstream after the exchanges enabled futures trading, but the US Securities and Exchange Commission subsequently quashed those hopes by asking asset managers to revoke their applications for Bitcoin ETFs.
Turnhill noted that the underlying blockchain technology that floated cryptocurrencies would demand a “massive shift” in developing apps that allowed for mainstream adoption.
He imagined legislators playing a big role in this unfolding and expressed the anticipation that a concrete global framework might result from the upcoming G20 Summit scheduled for March 2018.
Feature image by Chris Martinie