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The research arm of New York-based AllianceBernstein, a global investment manager with $ 631 billion in assets under management, has changed its mind when it comes to bitcoin as an investment asset.
In a research note produced for clients, seen by CoinDesk, Inigo Fraser Jenkins, co-head of the portfolio strategy team at Bernstein Research, said the company had previously excluded bitcoin as an investment asset in January 2018, right away. after bitcoin had reached its all-time high near $ 20,000.
But post-pandemic changes to the political environment, debt levels and diversification options for investors mean that the asset manager must now “admit. [bitcoin] it plays a role in asset allocation, at least in the long 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 quickly sold, as happened during the March market crash.
“From a narrow empirical point of view the downward shift in [volatility] of bitcoin makes it more desirable, but its greater correlation points the other way, ”wrote Fraser Jenkins.
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 way. fiat value date. “
Other issues like the use of cryptocurrency in crime and the heavy energy footprint of bitcoin mining have been cited as concerns around the asset, as well as growing 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 to politicians”.
“Cryptocurrencies have a place in asset allocation … as long as they’re legal!” He said.
Ultimately, Bernstein Research recommends that bitcoin can comprise 1.5% to 10% of portfolios, depending on the cryptocurrency’s monthly returns.
“The resulting allocation 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.
