Investments

US Firms Diss Bitcoin As Cryptocurrency Price Swings

Bitcoin’s monumental price swings have piqued the interest of traders and investment firms. But despite consistently hitting new highs all year, most mutual funds in the United States still refuse to invest in the digital currency.

The reason for the cautious approach is due to volatility and lack of liquidity.

Bitcoin peaked as high as $2,760.10 at a Slovenia-based exchange earlier this month. Since then, the price per coin has fallen to $2,292.53.

The rally was fueled by back-to-back digital currency conferences promoting altcoins and blockchain applications. During Consensus 2017, which was held around the same period bitcoin prices reached record highs, miners collectively reached an agreement to enable SegWit this year — a direct solution to bitcoin’s scaling issues.

According to Todd Rosenbluth, director of ETF and mutual fund research at CRFA, the cryptocurrency could be viewed as a reliable investment by mutual fund managers if the Securities and Exchange Commission (SEC) approved a bitcoin exchange-traded fund.

“From a mutual fund perspective, liquidity is paramount,” explained Rosenbluth.

At the moment, only four out of roughly 10,000 mutual funds in the country are holding bitcoin in their portfolios. Out of the four, three are from Kinetics, a New York-based company with over $1.2 billion in total assets.

Outside of large investment firms, bitcoin is viewed as a viable long-term investment. Like gold, some individuals are treating bitcoin as a safe haven to protect their assets from market instability.

Tim Draper, a multi-billion dollar venture capital investor, predicts the price of the digital currency will reach $10,000 per coin next year.

“I think it is particularly good as an option value as more options happen in bitcoin. It is good for stored value,” said Draper. “I think the most interesting thing will be when people need to pay out dividends and you can just push one button and shoot out bitcoin into a bunch of different wallets.”

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