Crypto is the 'top contender' for correction, money managers say

Though crypto is very volatile, it's not unheard of for different tokens to post huge gains. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - By many counts, 2021 was the year cryptocurrencies were finally embraced by institutions. Now those same money managers say the asset class is ripe for a big sell-off next year.

Digital assets are the "top contender" for a "major correction" in 2022, with nearly three-quarters of institutions polled saying they are not an appropriate investment for most retail investors, according to a survey done for Natixis Investment Managers.

Meanwhile, 28 per cent of all institutions surveyed currently invest in cryptocurrencies - and of those, nearly a third said they plan to increase their crypto allocations next year.

Overall, 8 per cent of all institutional investors surveyed - meaning all those who do and don't currently invest in digital assets - plan to increase their allocations next year. The total assets managed by respondents clock in at US$12.3 trillion (S$16.8 trillion).

This year saw a number of big fund managers and pensions starting to dabble in crypto, while numerous big-name investors famed for their financial markets acumen have also got involved. Many said digital assets such as Bitcoin could act as good inflation hedges amid a stimulus-heavy environment.

Though crypto is very volatile, it is not unheard of for different tokens to post huge gains.

An index of the largest cryptocurrencies - the Bloomberg Galaxy Crypto Index - added roughly 200 per cent so far in 2021.

In Natixis's survey, about 40 per cent said they recognise cryptocurrencies as a legitimate investment option though central banks will eventually need to regulate them.

Dire predictions for its demise have been a constant for Bitcoin, the largest and original cryptocurrency, since its debut a little more than a decade ago. Most have been to little avail. Since breaking into the mainstream consciousness, Bitcoin has jumped more than 5,000 per cent over the past five years.

The Natixis survey was conducted by CoreData Research in October and November and encompassed 500 institutional investors across multiple countries. That included four central banks, more than 20 sovereign wealth funds and over 150 corporate pension plans.

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