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Bitcoin not yet Good Enough for Institutional Investors


Bitcoin not yet Good Enough for Institutional Investors

Bitcoin had a super bullish ride which saw the bitcoin price touch $20K price region at the end of 2017. This trend triggered massive interest in the world’s flagship cryptocurrency from a host of institutional investors. However, Sanford C. Bernstein Ltd. has said bitcoin still has a long way to go before becoming a real investment portfolio for institutional investors.

Quantifying Legitimacy

Sanford C. Bernstein Ltd., a financial research and consulting firm for investment managers, believes that bitcoin’s 1,400 percent rally of 2017 makes other investment portfolios look like a joke. Despite these gains, the company also still doesn’t qualify the digital asset as a viable investment for institutional investors.

The head of global quantitative and European equity strategy, Fraser-Jenkins, firmly believes that the volatility, liquidity and high electricity consumption associated with the Blockchain-based digital currency, makes it a misfit for asset allocators.

These comments come after comparing the virtual currency alongside other legacy asset classes like the U.S S&P 500 Index, high-yield debt and commodities markets from January 2016 to December 2017.


Jenkins deduced that the virtual currency would need to continually post an average return of at least five percent monthly before investors can consider it an optimization to their portfolio. That’s just too high a hurdle, even before accounting for other risks, he noted.

“Cryptocurrencies do not have a size and liquidity that is appropriate for institutional asset allocation and the environmental, social and governance concerns of Bitcoin probably rule them out for many pension funds. Aside from all these concerns, the required return of Bitcoin at 5 percent per month for it even to have a meaningful place in allocation seems too high for investors to try to overcome these other issues.”

It’s worth noting that the Chicago Board Options Exchange (CBOE) launched its bitcoin options trading on December 10, 2017, followed by the CME group’s bitcoin futures contracts the week after.

These two institutional investors are the first to offer its customers an opportunity to invest in bitcoin futures. Despite all odds, bitcoin enthusiasts and market analysts believe that several other heavyweights in the financial and investment management sector will soon list Bitcoin on their platform as a viable investment portfolio.

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