The vast majority of money managers remain cautious on cryptocurrency investing, despite some big name investors putting their money behind digital coins, according to one analyst.
Speaking at Yahoo Finance’s All Markets Summit Plus, Fairlead Strategies founder Katie Stockton said crypto adoption still remains in the "very early stages" with limited institutional money flowing into the space.
“We're kind of at the very low end of that curve, right? That could accelerate to the upside,” she said. “That goes not just for individuals but institutions as well, especially pension funds is one source of major assets out there. Really which have not largely been deployed to cryptocurrencies now.”
More than half of the world’s largest banks now have exposure to crypto, either through direct or indirect investments in projects related to digital currencies and blockchain, according to Blockdata. But more conservative wealth managers, including state and local pension funds, have largely remained on the sidelines, concerned about the price volatility and regulatory uncertainty clouding the industry.
Earlier this month, two Virginia public pension funds announced they were seeking approval for a $50 million investment in a fund that buys digital tokens and cryptocurrency derivatives, becoming one of a few pension funds to publicly announce they are jumping in.
“I think when we get there, we will see that greater liquidity and sort of tighter spreads, if you will, influence them in a positive way such that there will be less volatility,” said Stockton. “But we found that using the charts and the technical indicators at our disposal that the cryptocurrencies are really minding support resistance levels. So while there is expected volatility, we have ways to manage risk to navigate those short-term swings by identifying key levels, and combining them with indicators that measure things like momentum and overbought oversold readings.”
Adoption among retail traders have accelerated at a faster rate, especially during the COVID-19 pandemic. The price of bitcoin alone has increased nearly 500%, from March 2020. The ease with which investors can now buy digital coins, through platforms like Coinbase (COIN), Paypal (PYPL), and Robinhood (HOOD), have also led to increased exposure. A recent study by the University of Chicago found that 13% of Americans traded crypto over the last 12 months, compared to 24% who invested in stocks.
Regardless of adoption rates, Stockton sees a "long-term uptrend in crypto." Despite a recent sell-off triggered by China’s central bank banning all crypto transactions, and fears around the Chinese property market, Stockton said crypto assets have held on to key resistance levels, signaling support in the market.
“Bitcoin has tended to outperform when they're collectively going lower and [crypto assets] do tend to remain directionally in step,” she said. “So even though you can always find sources of outperformance and underperformance, you'll find that most [coins] are all up on the same day and all down on the same day and I think that that is something that we can depend upon.”
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita