Dublin selectors: 'The tipping point is whether you want to be paid in crypto for your house'
-
Loading... - Albert Halasz
- 27 May 2022
- 288 Views
- 0 Like
- 0 Comment
Cryptocurrencies’ recent fall from grace has been difficult to ignore, with more than €187bn reportedly being erased from the entire market in a single day earlier this month.
Supporters are saying it is a sign of a maturing market levelling out, while its detractors claim the asset is inherently flawed.
Two Dublin-based selectors remain undeterred in their own view on digital assets, despite crypto currencies’ ups and downs.
Davy’s head of global investment selection Michael MacGrath for instance is sticking to a cautious view.
‘If you are looking for something which is freely tradable exchangeable, as a store of value and represents fundamental cash flow, then that is an equity,’
‘The tipping point and ultimate test of its value is whether you are willing to be paid in a cryptocurrency for your house,’ he said.
Bank of Ireland’s Tom Baragry has a similar approach to the asset class, clarifying that his team doesn’t allocate to crypto.
This is despite the recent advice by the Central Bank of Ireland for the Irish Funds Industry Association that strategies can hold indirect exposure to cryptocurrency and low levels of cash-settled bitcoin futures.
‘For me it is a case of: do not invest in anything you do not understand,’
‘If you do not know why something is going up or down, or what the valuation is. Do not invest in it,’ he said.
Valuations woes
One sticking point for fund buyers is the volatile and unclear nature of cryptocurrency valuations.
‘The most egregious part of it for me, is where you see people advising that one cryptocurrency is undervalued, relative to another. When in reality, neither of these things have a fundamental value. I do not know how you are doing that calculation,’ said Davy’s MacGrath.
The fears of more cautious investors around crypto have materialised with the crash of some stablecoins, casting doubt on the theory that a digital asset could serve as a risk hedge, acting as ‘digital gold’.
A prime example being the recent spectacular crash of stablecoins Luna and the TerraUSD currency - created by South Korean entrepreneur Do Kwon.
The crash has also seen real life consequences, as many South Koreans had put real-life savings into the cryptocurrency, even as its value was sliding, believing it to be a sign to buy, before it completely crashed.
However, die-hard crypto supporters say Coinbase and Terra-Luna are not the only ones taking a hit, with the wider tech space being a detractor, with the Nasdaq index having fallen 27% in 2022.
Long road ahead
Despite crypto’s volatile performance, some large banks have made moves to embrace the new asset class, making it harder to ignore.
Japan’s largest investment bank Nomura for example is preparing to launch a crypto subsidiary, with plans to set up a one-hundred strong unit by 2024.
This is while BNP Paribas and JPMorgan are now using digital tokens for short-term trading. All of this suggests that digital assets and cryptocurrencies are here to stay.
However, to fund buyers like MacGrath the technology behind crypto, such as blockchain, is more useful than cryptocurrencies themselves.
Despite investment banks growing their blockchain and digital assets arsenal, it seems crypto as an asset class has a long way to go before being adopted widely by institutional investors. At least where fund buyers are concerned. Read More...
