South Korea Welcomes Institutional Crypto Investors After Lifting Ban. Credit: Artur Widak/NurPhoto via Getty Images)
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Key Takeaways
South Korea’s National Pension Fund won’t invest in crypto despite investing in crypto company shares.
South Korea added nearly $20 million worth of Coinbase stocks and over $33 million in MicroStrargy stocks.
The NPS said the purchase of crypto-focused stocks was based on its indexation process.
South Korea’s National Pension Fund, the world’s third-largest pension fund, has opted against making direct investments into cryptocurrencies, bucking expectations after it had sunk significant sums into Bitcoin-aligned assets, including shares of MicroStrategy and Coinbase.
South Korea National Fund Has No Plans To Invest in Crypto
The NPS’s remarks came in response to a question from Rep. Baek Jong-heon of the ruling People Power Party, who had asked for clarification on the pension fund’s investments in crypto assets and its criteria for such investments.
In its response, the NPS distinguished between investments in crypto-based stocks and direct investments in cryptocurrencies, indicating that the two were distinct investment strategies.
The NPS explained that its investment approach relies on two primary methods: index management and consignment management. The index management process involves manually tracking the benchmark MSCI (Morgan Stanley Capital International Index), while consignment management companies oversee individual corporate investments on behalf of the fund.
Regarding the MicroStrategy and Coinbase investments, NPS said the purchase was made automatically once the two crypto-focused stocks were included in the MSCI benchmark index.
Rep. Heon said that the NPS should closely review investment policies related to digital assets and “thoroughly manage risks that may arise in the future by considering volatility.
The NPS’s crypto-focused stock investments seem to have been among the most significant gainers since they were added to the pension fund. Coinbase’s share price has risen from under $100 to its current value of $178, recording an 84% surge.
Coinbase stock price. Source: Google
On the other hand, MicroStrategy share prices have made a minor surge since NPS added it to the fund. MicroStrategy was trading around $133 in August when NPS bought the stocks; it is currently trading at $168.60.
Are Crypto Stocks Better Investment Than Direct Crypto Investment?
The stock price of crypto-focused companies is highly correlated with the crypto market. During the bull market, the shares of crypto-focused companies surge to new highs, while during bear markets, the stock prices sink to new lows irrespective of the company’s internal performance.
MicroStrategy is a case in point. Since the company added Bitcoin to its treasury, its stock price has become a proxy for Bitcoin’s performance.
During the 2021 bull run, MicroStrategy’s stock soared to a five-year high, only to plummet to yearly lows in the subsequent two years as Bitcoin’s price tumbled over 70% from its all-time high. This year, with Bitcoin’s price rebounding, MicroStrategy’s stock has followed suit, reaching new yearly highs.
Source: Google
The correlation between MicroStrategy’s stock performance and Bitcoin’s price action is striking. A five-year analysis of the company’s stock chart reveals a volatility profile that is eerily similar to Bitcoin’s. This raises questions about the National Pension Fund’s decision to opt for indirect exposure to crypto assets via stocks, citing concerns about price volatility.
However, it’s worth noting that even some of the most trusted stocks have exhibited higher volatility than cryptocurrencies during market turmoil, such as the COVID-19 pandemic.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
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