Every Chinese New Year, AsianInvestor makes 10 predictions about the economic, political, and financial developments and trends that might impact global markets and asset owners. As we move forward into the Year of the Tiger, we take a look back at how accurate some of these predictions were.
Will cryptocurrencies finally gain favour with asset owners?
While there continued to be a lot of interest in cryptocurrency from corporations and institutional investors, the same could not be said of the world’s asset owners.
Most notably, the Houston Firefighters’ Relief and Retirement Fund (HFRRF) made news across the cryptosphere when it announced in October that it had invested $25 million into bitcoin and ether, which by all accounts was the first time a US pension fund had put cryptocurrencies directly onto its balance sheet.
At the time, the HFRRF had a total of $5.5 billion in assets under management (AUM), which means its $25 million crypto investment represented just 0.5% of its portfolio.
The Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System also announced they were planning to invest a total of $50 million in Parataxis Capital Management LLC’s main fund, which buys various digital tokens and cryptocurrency derivatives. Since the news broke in September 2021, the funds have received board approval on the investment.
In March, global macro investor Raoul Pal revealed in a podcast appearance that Singapore’s sovereign wealth fund Temasek Holdings has been purchasing bitcoin from miners since 2018. He later repeated the same claim on Twitter. The information was never confirmed by Temasek Holdings.
Despite not quite receiving a direct nod of approval from asset owners, the crypto market has had an exciting year. Bitcoin‘s market value more than doubled in 2021, reaching an all-time high of $68,789 in November, after having started the year at $30,000.
On November 8, crypto’s total market capitalization broke $3 trillion for the first time, according to data from CoinMarketCap. While it still failed to impress the majority of asset owners, breaking the threshold represented a significant milestone for the emerging asset class — reaching par value with the American $3-trillion auto industry and nearly double the value of the $1.7 trillion telecommunications industry.
DBS Bank in Singapore had launched a crypto trading platform, and several major asset managers and banks are now reported to be following suit.
The usual suspects increased their BTC holdings, including business intelligence firm MicroStrategy, and Tesla, which reportedly purchased $3.7 billion and $1.5 billion in Bitcoin respectively throughout 2021.
Perhaps one of the most surprising developments in the crypto space last year was El Salvador’s big Bitcoin bet in September. The Latin American nation became the first country to make Bitcoin legal tender, reportedly to create more financial inclusion among El Salvador’s 70% unbanked population and to combat the high remittance fees faced by Salvadorans when sending or receiving cross-border payments.
It was an interesting year for crypto, but nothing indicates the ascendance of an asset in the financial system more than a pension fund investing in it, and for now the majority of these asset owners are still keeping the cryptocurrency market at arm’s length.