Cryptocurrency–While the crypto markets experienced their largest growth of the year, with Bitcoin establishing a new price high for 2019 above $4000, the rally was short-lived. Following several days of slow price increase, with a punctuation in growth on Feb. 23, the market saw a severe downturn, with BTC falling more than $400 in the span of hours.
However, some analysts are looking to other indicators of price growth for cryptocurrency which extend beyond the short-term volatility. According to Peter Tchir, a contributing analyst for Forbes, the increase in crypto-based pension investments is a bullish sign for market growth and industry adoption. Tchir cites early February’s announcement of Morgan Creek’s $40 million Blockchain Venture Capital Fund, which was backed by two separate pensions responsible for Fairfax County, Virginia’s police officer and state employee funds. Together, the pensions manage a collective $5.1 billion in assets, giving some indication to the weight of investment being put behind the decision to start backing cryptocurrency.
Tchir was also impressed by the development of University of Michigan and other high-profile universities beginning to back cryptocurrency funds in droves, with the analysts pointing out the natural relationship between collegiate institutions supporting a product that has the overwhelming favor of millennial and young investors.
Tchir goes on to list a number of reasons why cryptocurrency investors should take notice on the behavior of pensions, beginning with the exclusivity and difficulty of getting pensions to invest in projects,
“It is extremely difficult to get pension funds to make allocations into new asset classes. I have worked with pension funds and they generally have a lot of rules, regulations and procedures that they need to follow.”
As Tchir points out, public pension funds are governed by mandates and general investment behavior that shuns industries and projects with passing interest. The fact that multiple pension funds are now turning to Bitcoin and cryptocurrency for long-term investment gives a good indication that financial experts and analysts are turning positive on the industry’s outlook.
In addition, the action of FairFax County, University of Michigan and other large name funds is likely to have a snowball effect on the pension investment landscape. According to Tchir, “If some funds [invested in cryptocurrency], it is likely other funds will too.” The barrier to entry for investing in cryptocurrency–i.e. being the first mover–has likely delayed the entrance of pensions into the industry longer than it would have otherwise. Whether because of the perception of cryptocurrency, the risk inherent in the market volatility and lack of regulation, or the waning public perception following 13 months of bear market conditions, the majority of pensions have thus far avoided crypto funds.
However, it’s clear that the interest of pension fund consultants is becoming more receptive to cryptocurrency, with the Morgan Creek announcement being the first of what could become many large, public pension funds to invest in cryptocurrency. As Tchir puts it, the methodical nature of pension fund consultants–which tends to be exceedingly cautious and analytical about entering a new and possible volatile market–could present a “game changer for the market” if cryptocurrency and digital assets prove to be profitable.