The New York-based research arm of AllianceBernstein, a global investment manager with $ 631 billion in assets under management, has officially changed its mind about bitcoin as an investment asset.
The new economic and political environment is driving investment managers to review their position on Bitcoin
In the final report of a research produced for clients, Inigo Fraser Jenkins, co-head of the team that studies the best strategies for each wallet at Bernstein Research, said that the company had previously excluded bitcoin (quotation BTC) as an investment asset in January 2018, shortly after bitcoin hit its all-time high near $ 20.000.
But the pandemic-related changes in politics, coupled with debt levels and diversification options for investors mean that the asset manager now has to "admit that [bitcoin] has" a role in asset allocation, at least for a long time. term.
Fraser Jenkins said the "significant reduction" in bitcoin's price volatility makes it more attractive as both a store of value and a medium of exchange. The pandemic has also seen an increase in bitcoin's correlation with other major assets.
On the other hand, he said, bitcoin is a liquid asset and can be sold quickly, as happened during the March market crash. “From a narrow empirical point of view, bitcoin's downward shift in [volatility] makes it more desirable, but its higher correlation points the other way,” wrote Fraser Jenkins.
Bitcoin as a hedge against inflation
When it comes to a role in hedging against inflation, "the driver of bitcoin is similar to that of gold," according to the note, although the cryptocurrency may not "move exactly in a way that would counter inflation in a fiat value date ".
Other issues such as the use of cryptocurrency for criminal actions and the significant energy expenditure of bitcoin mining were cited as concerns around the asset, as well as increasing regulatory scrutiny.
According to Fraser Jenkins, there could be potential problems for bitcoin in the future as well. With the pandemic that could make governments more powerful and take a bigger role in running economies, if cryptocurrencies get much bigger than today they could become "a nuisance for politicians".
“Cryptocurrencies have a place in asset allocation… as long as they're legal!” He said. Ultimately, Bernstein Research recommends that bitcoin can occupy 1,5% to 10% of portfolios, depending on the cryptocurrency's monthly returns.
"The allocation to devote to bitcoin is low, but within this simple optimization framework the allocation to some other asset classes is zero, so in that context bitcoin appears to be empirically potentially significant," wrote Fraser Jenkins.
