They’re back! Less than a year ago, we thought we had put the final nail in the coffin in all things that are cryptocurrencies [Cryptos, Revisited]. FTX had imploded, Coinbase was getting sued, and prices were down by more than two thirds for Bitcoin and Ethereum. Yet here we are, within touching distance of new all-time highs.
All it took was a verdict from the SEC, the need for investment managers to diversify, and huge speculative demand that is increasingly driven by FOMO. Can it continue, and what is the intrinsic worth of this new asset class anyway, is hard to say. One thing is for sure though, cryptocurrencies are here to stay.
Fidelity just announced that they recommend allocating to cryptocurrencies as part of a diversified portfolio. Blackrock raised $10 billion in the fasted time ever for its Bitcoin ETF and Vanguard may still be on the fence, but just fired the CEO who was vehemently resistant. There is a lot of money out there, and wealth managers can now invest with regulatory approval.
If you had added a couple of percent in cryptos to a balanced portfolio in the last ten years, it would increase your annualised return by about 0.75%. With a lot of volatility, of course, but the nice thing is, if you don’t like it, you press a button and you are out. That’s a lot more than you can say about most other alternative investments.