By CCN: Travis Kling, a former L/S Equity Portfolio Manager at Point72, a hedge fund with $13 billion in assets under management (AUM), has said in the long-term, every investor will have some exposure to crypto assets like bitcoin. Kling, who founded crypto asset management…
By CCN: Travis Kling, a former L/S Equity Portfolio Manager at Point72, a hedge fund with $13 billion in assets under management (AUM), has said in the long-term, every investor will have some exposure to crypto assets like bitcoin.
Kling, who founded crypto asset management firm Ikigai Asset Mangement, said:
Every investor will have crypto asset exposure in their portfolio eventually. All of them. How early or late each of them are will matter a lot for that portfolio.
The statement of Kling comes after the bitcoin price has risen 66 percent in the past month, breaching $8,000 and recovering to late 2018 levels.
In an essay published on Kana & Katana, a research platform operated by the Ikigai team, Xapo CEO Wences Casares made a case for every $10 million portfolio holding at most 1 percent in bitcoin.
Although crypto assets remain a high-risk asset class, the potential reward of owning bitcoin in the case it succeeds in becoming an alternative store of value over the long run is worth a small risk of 1 percent of a portfolio.
“I suggest that a $10 million portfolio should invest at most $100,000 in Bitcoin (up to 1% but not more as the risk of losing this investment is high). If Bitcoin fails, this portfolio will lose at most $100,000 or 1% of its value over 3 to 5 years, which most portfolios can bear. But if Bitcoin succeeds, in 7 to 10 years those $100,000 may be worth more than $25 million, more than twice the value of the entire initial portfolio,” Casares wrote.
For large portfolios, family funds, and institutional investors to allocate capital into the crypto market, the presence of trusted custodial solutions is key especially concerning an emerging asset class like crypto.
Institutions would favor a wide range of custodial solutions provided by reputable companies to ensure their capital is invested in a regulated, protected, and insured environment.
Over the past five months, the crypto sector has arguably seen more progress in institutionalization than in the past five years, with companies in the likes of ICE and Fidelity making moves to solidify the custodial infrastructure supporting bitcoin.
On May 13, Kelly Loeffler, the CEO of Bakkt, a bitcoin futures market launched by the New York Stock Exchange’s parent company ICE, said that the platform is in the process of obtaining an approval fro the Commodities and Futures Trading Commission (CFTC) and is set to open bitcoin futures custody in July.
“We’ve worked closely with the CFTC to develop contracts that both meet our customers’ needs for trading, transparency, and market certainty, and are also compliant with Federal regulations,” said Loeffler.
An abundance of regulated custodial platforms and services offered by financial institutions with decades of track record in the finance sector would provide certainty to institutions and asset managers in regards to the structure of the crypto market, raising the probability of crypto assets being considered a major asset class in the long run.
Already, as seen in the achievement of record volumes by the CME bitcoin futures market and Grayscale’s $1.8 billion Bitcoin Investment Trust (GBTC), the institutional interest towards bitcoin and the rest of the crypto market has increased in recent weeks.
CME recorded a daily volume of over $1 billion on May 13 as the bitcoin price surged from $7,000 to over $7,800. At the time of reporting, the bitcoin price remains above $8,000.