Cryptocurrencies may soon land the white whale of the investing industry: institutional funds such as pensions and endowments.
That’s according to Ari Paul, chief investment officer at cryptocurrency hedge fund BlockTower Capital, who told CNBC that he believes it’s “inevitable” that these institutional investment funds will add cryptoassets to their portfolios — sooner rather than later.
“I do think it’s inevitable from a few angles,” said Paul. “Even if they never believe in it as an asset class, they’re smart enough to recognize the alpha opportunity.”
“Endowments could pull the trigger at any moment. They’re on the fence,” he added.
Paul, who served as a portfolio manager for the University of Chicago’s strategic hedge fund prior to founding BlockTower last year, explained that institutions are interested in investing in Bitcoin and other cryptocurrencies but are hesitant to be the first to do so.
“We’re in a bear market until new buyers are enticed,” he said, adding that an Ivy League school making a minor investment could cause ripple effects throughout the institutional market. “Even a small dollar amount is legitimizing. If that happens, every family office says, ‘Oh, Yale’s in. That gives us the excuse.'”
Before that happens, though, institutions will need access to trustworthy cryptoasset custodians. Assuming that custodians expand their services and continue to build their reputations, Paul estimates that endowments could make their first cryptocurrency investments within three to four months. Pensions and other institutional funds could then follow approximately six months after that.
Paul is not alone in this prediction. On Thursday, Pantera Capital issued a rare buy recommendation for Bitcoin, explaining that the fund is convinced that institutions are preparing to finally take the plunge into cryptoassets.
“I rarely have such strong conviction on timing. A wall of institutional money will drive the markets much higher,” wrote Pantera founder Dan Morehead.
Meanwhile, Wall Street strategy firm Fundstrat is doubling down on its bet that the Bitcoin price will reach $25,000 by the end of 2018 based on the premise that the markets will turn bullish once tax-based sell pressure evaporates.
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Last modified: May 20, 2020 8:52 PM UTC