The currently much-discussed cryptocurrency has not affected the long-term future prospects of digital assets. At the same time, companies that are really strong in this area now have the opportunity to improve and adapt to market conditions.
That’s what Peter Habermacher, CEO of cryptocurrency-focused asset manager Aaro Capital, says.
Habermacher commented Citywire chooses in the wake of a downturn in the crypto markets that resulted in the collapse of Luna, TerraUSD’s original token – an algorithmic “stablecoin” pegged to the US dollar.
While some have argued that the future prospects for cryptocurrencies are brighter today than ever before, Habermacher said a bear market is an important test for technologists and specialists in the field.
Crypto is the core of Industry 4.0
“Cryptocurrencies are one of the most exciting long-term growth stories right now and are at the heart of the Industry 4.0 revolution,” he said.
With increasing adoption, clearer supervision from regulators, continued technological innovation and more sustainable use cases, mass adoption is only a matter of time.
Charlie Morris, who founded another specialist in this field, ByteTree Asset Management, said ups and downs are typical of a new and cyclical asset.
Morris, formerly head of absolute returns at HSBC GAM, partnered with crypto specialist 21Shares and launched 21Shares ByteTree Bold ETP in April, a product that invests in both gold and bitcoin.
Regarding the current risk profile for cryptocurrencies, Morris has created a table that he believes divides different asset classes according to their current risk.
Risk Table and Examples by Charlie Morris, ByteTree AM
Basically, low risk offers cash, while low to medium risk includes 10-year bonds, well-structured portfolios and non-leveraged currencies with volatility of less than 10%.
Medium-risk assets are all assets that can fall, but which are unlikely to fall very quickly. “In that sense, ByteTree Bold is a medium-risk strategy,” Morris said.
Today, bitcoin is medium to high risk, making it no more risky than Shell, HSBC or emerging markets.
Morris said the changes in the market reflect developments in cryptocurrencies. “Five years ago, it was extremely risky to invest in bitcoin, which went down to high risk three years ago when the network was mature. Today, bitcoin is a high risk medium, making it no more risky than Shell, HSBC or emerging markets. “
Morris said his own ETP approach has remained relatively unaffected as gold has risen in line with the decline of Bitcoin. Bitcoin fell to 13%, while gold now accounts for 87% of the fund’s weighting, compared to 18.5% bitcoin and 81.5% gold at the fund’s launch.
“It’s a magical combination, as gold and bitcoin both have inherent countercyclical features, and the fund increases the return on the former while reducing bitcoin risk,” Morris added.
Morris said the decision to mix Bitcoin with a physical metal makes sense, especially given the current environment. However, he also warned against mixing different cryptocurrencies in a portfolio and considering this as sufficiently diversified.
“It’s hard to come up with a good strategy by mixing different cryptocurrencies because the point of diversification is to reduce the risk. You do not reduce the risk by diversifying within cryptocurrencies.”