Bitcoin News: The idea that cryptocurrencies are solid investment vehicles is gaining ground among institutional investors. According to a recent report by Nickel Digital Asset Management quoted by CoinDesk, almost 82% of institutional investors and asset managers surveyed in the United States, United Kingdom, France, Germany and UAE expect to increase their exposure to crypto and digital assets.
Significantly, cryptocurrencies like Bitcoin offer good protection against inflation as well as pandemic-induced weakness in traditional currencies, including the US dollar.
Also, confirmations from Tesla CEO Elon Musk and institutional investors such as Paul Tudor Jones and Ray Dalio make 37% of respondents feel confident about investing in cryptocurrencies.
Four out of 10 people surveyed are expected to be aggressive about increasing their holdings. The increase in risk will primarily be driven by long-term capital appreciation prospects of cryptos and digital assets, as 58% of respondents noted.
Elon Musk has been one of the advocates of cryptocurrencies with his support for Bitcoin and Dogecoin. Despite abandoning Bitcoin due to its massive power consumption and consequent pollution problems, Musk continues to support Dogecoin through memes and tweets, thus increasing its price. The joke money is currently up 4,865.65% year over year.
However, the pollution problem prompted Tesla to reject Bitcoins as payment for its cars in May. The electric car giant is likely to continue trading only if the currency is mined using 50% of renewable energy.
Tesla’s ban, along with regulatory pressure in China, as well as a more hawkish Fed tone, dealt Bitcoin a blow 46.3% from its year high of $64,829.14 on April 14.
The Bitcoin crash also dragged crypto-focused stocks down. Since April 14, Marathon Digital and Riot Blockchain, both Zacks Rank #5 (Strong Sell) shares, have fallen 30.9% and 29.4% respectively. Also, Coinbase and MicroStrategy fell 28.3% and 13.8%, respectively.
Notably, Musk and Tesla’s focus on using green energy for mining has impressed the majority of investors, according to the latest Investing.com survey, as 72% of investors now prefer green cryptocurrencies like Ripple and Cardano.
Hedge funds enthusiastic about cryptocurrencies
Cryptocurrencies are highly valued by hedge fund managers. Hedge funds are expected to increase their exposure to cryptocurrencies by 2026, holding an average of 7.2% of their assets, according to a recent FT article that cited a survey of 100 hedge fund CFOs by Intertrust. This would equate to roughly $312 billion in crypto assets across industries, with 17% of respondents expected to hold more than 10% in cryptocurrencies.
Hedge fund pioneer Paul Tudor Jones expressed his optimism for Bitcoin as a solid investment tool to preserve wealth over the long term. Jones sees the digital currency as a hedge against inflation and expects to increase Bitcoin holdings from the current 1-2% to 5%. Also, his company Tudor Investment has custody ties with Coinbase and Bakkt.
Coinbase also has a custody relationship with Daniel Loeb’s Third Point LLC. The company had $122 billion in corporate assets as of March 31, 2021. Ray Dalio, another hedge fund billionaire and founder of Bridgewater Associates, finds Bitcoin attractive as a savings tool. Dalio, who was once skeptical of the digital currency, now owns some Bitcoin and believes it is a better investment than bonds.
Also, according to Anthony Scaramucci of Skybridge Capital, Bitcoin is poised to “replace” gold. Despite the volatility of the digital currency, Scaramucci is optimistic about its growth prospects, according to CNBC.
Also, Alan Howard, co-founder of the Brevan Howard hedge fund, is reportedly planning to invest up to 1.5% of his core fund in crypto. Howard actively invests in crypto startups such as Kikitrade, Copper, CoinShares, and Ledn.
Crypto volatility makes stocks safer bets
Admittedly, cryptocurrencies are high-risk investments and not for everyone due to their inherent volatility. While the growing institutional investor base may provide some form of stability to the crypto market, crypto enthusiasts are advised to keep crypto exposure to a minimum (1-2% of the portfolio) to avoid portfolio damage from worrying price fluctuations.
In this scenario, investors can use stocks to take risks in cryptocurrencies and the underlying Blockchain technology. Investors focus on stocks like NVIDIA and Square to take risks without unnecessary risk possible.
NVIDIA Corporation Price
Remarkably, NVIDIA capitalizes on the strong demand for its GPUs among cryptocurrency miners, while Square facilitates Bitcoin transactions. It currently carries both NVIDIA and Square Zack Rank 2 (Buy it).