Bitcoin is Not a Viable Portfolio for Institutional investors

Bitcoin is Not a Viable Portfolio for Institutional investors

Bitcoin experienced a strong rally which took the bitcoin price to the $20K price area in December 2017. This phenomenal surge triggered the interest of many institutional investors, in the world’s number one cryptocurrency.

However,  Sanford C. Bernstein Ltd. has said that bitcoin is still not a viable investment portfolio for institutional investors.

A Long Way to go

Sanford C. Bernstein Ltd., a highly reputable financial research and consulting firm for investment managers, Is of the opinion that Bitcoin’s 1400 percent price surge of 2017 makes other investment portfolios look epileptic but such a massive gain doesn’t necessarily qualify the cryptocurrency as a viable investment for institutional investors.

The head of global quantitative and European equity strategy, Fraser-Jenkins, opined that the volatility, liquidity and high electricity consumption associated with the Blockchain-based virtual currency, makes it unsuitable for asset allocators.

Comparing the virtual currency returns, volatility, and correlations with some other asset classes like the U.S S&P 500 Index, emerging markets, high-yield debt and commodities from January 2016 to December 2017.


The strategist noted that the virtual currency would need to continually post an average return of at least 5 percent every month in the future to enable bitcoin to be ranked among the optimized portfolios class. That’s just too high a hurdle, even before accounting for other risks, he noted.

The strategist also stated that:

“Cryptocurrencies do not have a size and liquidity that is appropriate for institutional asset allocation and the environmental, social and governance concerns of Bitcoin probably rule them out for many pension funds. Aside from all these concerns, the required return of Bitcoin at 5 percent per month for it even to have a meaningful place in allocation seems too high for investors to try to overcome these other issues.”

It’s worth noting that the Chicago Board Options Exchange (CBOE) launched its bitcoin options trading on December 10, 2017, the following week, the CME group also started its bitcoin futures contracts. These two “big whale” institutional investors are the first to offer its customers an opportunity to invest in bitcoin futures.

Despite all odds, bitcoin enthusiasts and market analysts have predicted that 2018 could be another successful year for Bitcoin as several other institutional investors will soon start adding Bitcoin to their investment portfolios.