Ever since the birth of the first cryptocurrency nine years ago, professional money managers have almost universally dismissed it as a potential investment. Although a lot may have come around on the power of the underlying technology, cryptocurrencies have often been ignored or ridiculed. As the price gains of cryptocurrencies like Bitcoin and Ether were generating daily headlines last year, a number of fund managers went on the attack, calling the sector a pyramid scheme. Maybe they really felt that way, but who knows? They might just have been a little jealous.
On the other hand, for the crypto faithful, it’s always been a question of when, not if, and the rest of the world catches on. Their trust and faith has put them on the proper avenue of a powerful investment thesis, one best phrased as a question: What might happen when institutional money managers, who collectively control most of the world’s investment capital, would venture into a new asset class for the first time?
Now, the answer lies in basic math. Look, we all know that institutions control so much money that it seems like they own half a trillion dollars’ worth of Apple alone, but that’s just one stock within a single asset class. If all the funds and family offices would decide to invest a portion of that capital to a diversified portfolio of cryptocurrencies, they may actually double the size of the sector.
A lot of people who is working in institutional finance for years might disagree or argue about this but contrary to what an outsider might think, people who actually manage other people’s money don’t usually base their decisions on how to maximize returns. Their first consideration is, should something go wrong, could they really justify their actions?
Even if the combined effect is a lot of groupthink and the familiar cycle of booms and busts, backing up this sector is a smart way for individual managers to make future investment decisions.