Some financial experts believe that the price of cryptocurrencies is entirely driven by speculation by investors. In the past few years, critics have argued that fixed-income instruments such as Treasury bills have nothing to do with digital assets. This view is quite accurate, because investors in most asset classes are not allowed to invest in Bitcoin at this time (Bitcoin) And altcoins.
Public pension funds, retirement plans, fixed income and most unlevered stocks and multi-market mutual funds can only invest in certain asset classes. These restrictions come from the fund category regulations, the fund’s own charter and the manager’s risk assessment.
Not every fund can invest in Grayscale GBTC Trust
Most people don’t know that mutual fund managers have no absolute control over investment decisions. The fund manager is a third-party company that acts as an intermediary between the fund manager and investors to verify and allocate investment-related assets.
Therefore, the Fund managers may rule that certain instruments pose significant risks And restrict exposure or deny access to it. In this example, the trust fund is an investment tool used by Grayscale Bitcoin (GBTC), which involves the credit risk of the issuer.
Global asset management companies usually have 30% to 60% fixed income exposure, so they are unlikely to be exposed to cryptocurrencies. Amundi, a leading European investment company that manages more than US$2.1 trillion in assets, is a good example.
according to Boston GroupThe global asset industry has exceeded 100 trillion US dollars, and North America accounts for nearly 50% of this figure. Unfortunately, these astronomical figures caused analysts to mistakenly associate these figures with Bitcoin ETF tools.
#Grayscale Cooperated with Bank of New York Mellon, the world’s largest custodian bank, with assets under custody of US$41 trillion. In February 2021, #New York Mellon Announce their entry #encryption space.Grayscale is competing for one #Bitcoin ETF.@Grayscale @New York Melon #etf #bitcoinetf pic.twitter.com/RfSO7UOKGS
— Thinking Crypto-YouTube channel and podcast (@ThinkingCrypto1) July 13, 2021
According to Reuters, more than half of investment-grade corporate bonds in the Eurozone currently Negative yield tradingThis includes government debt worth US$7.7 trillion, accounting for 70.8% of the total.
The Financial Times reported that the value of global negative-yield bonds has exceeded USD 16.5 trillion, Driven by a more pessimistic outlook for investors and the purchase of bonds by the central bank.
Investors will gradually withdraw from fixed income strategies
There is reason to believe that investors who earn negative yields will eventually switch to riskier assets, although it is unlikely to switch completely to cryptocurrencies. However, the most likely beneficiaries are unlevered multi-asset and alternative investments, because these instruments are generally less risky than stocks and high-yield structured assets and bonds.
Therefore, the U.S. Securities and Exchange Commission (SEC) finally approved the Bitcoin ETF to open the door to a large number of funds currently excluded from cryptocurrency risks.
Even if ETFs are reserved exclusively for some stocks and multiple asset classes, the new tool does not need to capture $500 billion to drive Bitcoin’s market value to more than $2 trillion. There are less than 2.5 million coins deposited on the exchange, equivalent to 125 billion U.S. dollars, which can be used for trading at any time.
Commodity funds are the best candidates
according to iShares, The value of global commodity exchange-traded products totaled 263 billion U.S. dollars. Considering that not all mutual funds are listed, it is reasonable to assume that the actual number exceeds US$500 billion.
This means that only 1% allocated from this particular asset class is equivalent to 5 billion U.S. dollars, and such an investment is certainly enough to push the Bitcoin price above the historical high of 65,000 U.S. dollars.
If the BTC ETF is approved, traders will preempt potential capital inflows immediately after the approval is announced, regardless of whether these products only received $5 billion in the previous months.
As long as the government and the central bank continue to inject liquidity, buy bonds, and issue stimulus plans, they will gradually flow into riskier assets, thereby increasing the demand for ETFs.
The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.