On digital currencies, Asian investors get contradicting advice, depending on who they are asking.
It’s no secret that Asian markets often dominate some of the largest fiat gateways to cryptocurrencies.
Korea’s Bithumb has the highest fiat/Bitcoin volumes, around $145 mln per day, while also taking first place for Ethereum and the Korean Won at just over $90 mln per day. Chinese Yen, on the other hand, is the largest fiat gateway to Litecoin.
However, when looking at managed portfolios and investment advice, Asian experts have some opposing views.
Not savvy on crypto
While clearly private users are gaining interest in crypto, some private banks in Asia seem to disagree.
Richard Jerram, the chief economist at Bank of Singapore says:
“They don’t have a space in high net worth portfolios. It’s not clear to me what they [cryptocurrencies] are. You can understand it as a means of transacting in an efficient fashion but it doesn’t seem to fit the necessary definition of being money or a financial asset.”
This is not to say that there is not a strong interest from clients as he points out that clients are asking. The bank just spent a month traveling around the region and cryptocurrencies were a common question at investor Q&A sessions.
Yves Bonzon who is the CIO of Julius Baer says:
“Their volatility, to begin with, speaks very much against them being a store of value. They are paradoxically very advanced from a technological point of view but extremely backward, stone-age like in terms of monetary system.”
Independent asset management Crossbridge Connect’s head of digital strategy points out that transparency is important to clients and therefore they are not looking to introducing cryptocurrencies.
He also points out that for some digital currencies there is a risk of going to the way of the dinosaur.
With over 828 alternative coins listed on coinmarketcap.com, he says, “Bitcoin could easily become the Netscape or Myspace of cryptocurrencies.”
Some feel that Asian demand to include cryptocurrencies in a portfolio is in fact there but that private banks are actually the ones he might not be ready to suggest or manage them. Jehan Chu is a partner at Kinetic Capital, a Hong Kong venture capital and hedge fund focusing on Blockchain and cryptocurrencies.
Chu has seen private bank representative attendance at Blockchain related events increase over the last few months.
“I give talks at events and many representatives from private banks attend these conferences and are interested in cryptocurrency investments. For sure there’s been a 40 to 50 percent increase in the kind of contact that we’ve seen in the past three months… Six months ago I had very little interest from private banks,” says Chu.
He does, however, warn that many tokens are simply not worth anything.
Dave Chapman of Octagon Strategy recently told regional finance magazine, Citywire Asia, that there has indeed been an increase in interest from private banks. Previously it was only high net worth individuals enquiring but now asset managers and private banks are also looking to get in.
Octagon Strategy has spoken to various banks in the past three months, consulting on what digital currencies are and where they derive value from. The growth over the past few months cannot be ignored.
Safe bets are safe
Saxo Bank strategist Kay Van-Petersen is somewhere in between. He suggests that in these early days it is best for investors to hold a basket of cryptocurrencies for a long term period as opposed to trade short term. A three percent portfolio of a high net worth individual’s investable assets is enough.
Petersen tells Citywire Asia:
“You’d probably look at is as a super alternative, probably not putting more than three percent of your net worth because when you look at the cryptocurrency space or something this new, no one is an expert on it and there are so many unknowns, you aren’t going to get an informational edge.”