Not so fast: Alternative Investment Managers Skeptical of Cryptocurrencies

Cryptocurrencies appear to be taking the world by storm, but many alternative investment managers are unconvinced. A survey conducted by BarclayHedge finds that more than two-thirds of hedge fund managers have no intention of investing in cryptocurrencies.

Managers were asked if they currently invest in or plan to invest in cryptocurrencies. Sixty-eight percent answered “No,” while 24% responded that they either currently invest or plan to invest within the next six months. A further 8% replied, “We’re studying the situation.”

 

Q1: Do you currently, or plan to, invest in cryptocurrency?

Barclay Hedge Fund and CTA manager survey

17% — Yes
3% — Yes, within the next 3 months
4% — Yes, within the next 3 - 6 months
0% — Yes, some time beyond 6 months
8% — Maybe; we’re studying the situation
68% — No

 

In the survey, hedge fund managers were also requested to select one of the three statements below which best reflected their point of view on cryptocurrencies.

 

Q2: In our opinion, cryptocurrencies...

Barclay Hedge Fund and CTA manager survey

26% — Are an exciting investment opportunity
37% — Are a classic investment bubble
37% — May be important but won’t have as big an impact as the hype suggests

 

While approximately one in four (26%) managers believe that cryptocurrencies are an exciting investment opportunity, 74% believe that cryptocurrencies are either a bubble or not as important as currently portrayed.

“This survey allows us to distinguish between public perceptions and professional opinions of cryptocurrencies,” says Sol Waksman, founder and president of BarclayHedge. “Although there is a great deal of media attention on this area, they are still far from achieving broad acceptance as a medium of exchange or a storehouse of value.”

Prominent names on both sides of “the coin”

Cryptocurrencies have drawn a great deal of attention. Bitcoin, the largest and most well known, has seen it price rise by 500% in 2017. JPMorgan Chase head Jamie Dimon recently called bitcoin “a hoax” and promised to fire any employee that was trading it, while noted investor and Shark Tank star Mark Cuban recently flipped from crypto critic to backer, reportedly investing in new coins through Initial Coin Offerings (ICOs).

In the face of general skepticism from the alternative investment community, the number of hedge funds that are investing in or trading cryptocurrencies has risen sharply, with a reported 110 funds in existence. One noted proponent is Daniel Masters of Global Advisers which offers the cryptocurrency hedge fund GABI and recently launched an Ethereum ETN on Nasdaq Stockholm and an ether backed ICO (initial coin offering) in July. Ether is currently the second largest cryptocurrency and is noted for its flexibility that allows for the creation of self-executing smart contracts.

Speaking to Coindesk, Masters had direct words for Jamie Dimon.

"I don't think Jamie Dimon has an open enough mind, all the time, to properly accept the contribution that digital assets can make," he said. "They (JPMorgan) either need to get with the program and support their clients who want to buy bitcoin, or they need to stop talking about it like a fool. Because those things are not consistent with an organization of that character."

 

 

Note: The BarclayHedge survey was conducted between September 11 and September 29, 2017. We surveyed hedge fund managers and commodity trading advisors that currently provide performance data to the BarclayHedge suite of database products. One hundred-nineteen fund managers responded.