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Van Eck Paints a Picture for Bitcoin Investment for Institutions

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Bitcoin is becoming more and more popular for investors to look into as although it is notoriously risky with the volatile swings, it has proven, over a longer investment period, those risks are often worth the reward.

However, the investors being targeted by the cryptocurrency space have evolved a lot in the past few years as it is no longer simply individual or retail interest in holding onto Bitcoin. Institutional investment is flooding into space, and its impact is also being noted.

There have been calls in the mainstream media for people to start looking towards Bitcoin as a hedge investment in times of financial uncertainty – which is also starting to loom. Additionally, a new report from investment management firm Van Eck suggests that institutional investors should allocate a small percentage of their capital into Bitcoin.

Minimal volatility

The suggestion from Van Eck is that if major institutional investors were to put a little Bitcoin into their portfolio, it would have minimal impact on the volatility, and the returns would be worth the small risk that comes with it. 

“A small allocation to Bitcoin significantly enhanced the cumulative return of a 60% equity and 40% bonds portfolio allocation mix while only minimally impacting its volatility,” the report read.

More so, other reasons why these major institutions should be looking towards Bitcoin is because the cryptocurrency has a very low correlation with traditional asset classes. This is part of the reason why it is being seen as a hedge but has a big potential for portfolio diversification.

However, Bitcoin still remains a relatively untested and new asset class for institutional investors to invest in, as such, Van Eck is also quick to list a number of considerations that can lead to risk. 

These include hacks, price volatility, quantum computing, the novelty of early-stage applications, governance shortcomings and ecosystem design. This is also a nod towards Bitcoin needing to do a lot more before it achieves critical mass, especially in relation to institutional interest. 

Bitcoin needs institutional interest

What is more, institutional investors may be able to take advantage of Bitcoin, but the coin can also heavily benefit from increased interest in this sector. Bitcoin has reached a stage where individual interest is not really going to push it to the next level, and retail investment is limited due to its digital gold similarities. 

If institutional investors start pumping large sums into the ecosystem to hold the coin it will gain a big boost in price, as well as normalization and legitimation. 

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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