If you think no one’s interested in volatile cryptocurrency outside of crazed individuals who don’t understand the risk they’re taking—think again. The ultra-wealthy have lined up, too, and even a trillion-dollar wealth fund is adding crypto to its portfolio.
In a Knight Frank survey of more than 500 private bankers who represent $3 trillion in managed wealth, more than 21 percent said they had not only invested in cryptocurrency, but increased their investments last year.
It shouldn’t come as much of a surprise that some swathes of the ultra-wealthy have heavily invested in crypto. After all, the average Joe investor would hardly have managed to bring cryptocurrencies’ total market cap from $17.7 billion in January 2017 to over $615 billion by the end of the same year.
That said, equities are still the favorite of the ultra-rich, but cryptocurrencies are gaining traction.
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Trillion-dollar Boston-based Wellington Management Co. is the latest major wealth management fund to talk about adding cryptocurrencies to its portfolio. It even recently upgraded its systems to enable Bitcoin derivative trading, and now it’s taking positions on crypto-related companies, according to Bloomberg. Related: Nasdaq Hits Record High After Regaining February Loses
That doesn’t mean Wellington is throwing caution to the wind. It’s not going for direct exposure to cryptos as it manages over $1 trillion in client funds.
More cautious exposure might be to related industries, such as the hardware for crypto-mining, and most notably—the soaring semiconductor industry, where stocks such as Nvidia (NYSE:NVDA) and Micron (NYSE:MU) have been stellar performers over the past year.
As Wellington notes in a recent statement carried by Bloomberg: “Crypto is a real thing — it’s not going to go away. This year, the world is starting to come to terms with the existence of crypto. It’s based on blockchain, and it’s very secure and very low overhead. I think there’s clearly real utility. It’s a real phenomenon, and so everyone is coming to terms with it.”
The crypto ball is rolling, and Wellington’s testing of the crypto waters may lead to similar moves by other institutional investors, says Bloomberg.
What’s less clear is how the ultra-wealthy view blockchain itself—the digital ledger that forms the backbone of cryptocurrency--and how they differentiate it from crypto coin.
According to Knight Frank’s Nicholas Holt, speaking on CNBC:
"In a separate question, we asked about their understanding of blockchain and there's still a huge amount of misunderstanding about blockchain.”
"So, although people are getting on the train about investing in cryptocurrencies, perhaps there's not a full understanding of what this could mean to their wealth portfolio," Holt added.
In other words, we’re only just beginning to tap into the biggest wealth available for crypto, and when all this big money starts to see the massive opportunities in the much wider blockchain, we might be looking at a very different investment picture.
By Jan Bauer for Safehaven.com
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