D.he Volksbanks fund company, Union Investment, plans to buy crypto assets for other funds after a pilot test with Bitcoin certificates. “We are considering adding bitcoins in small amounts of a maximum of 1 to 2 percent to a handful of other funds for private investors,” said portfolio manager Daniel Bathe in an interview with the Bloomberg news agency. This will be possible from the fourth quarter, but there is no fixed date yet.
At the beginning of this year, Union Investment had for the first time included crypto values in the form of so-called Delta-1 certificates in a mixed fund, the PrivatFonds Flexibel Pro. Currently, less than 1 percent of the fund’s assets are held in Bitcoin.
One observes increased interest of mixed fund managers in crypto investments, quoted Bloomberg Kamil Kaczmarski, advisor for financial service providers at the management consultancy Oliver Wyman. Many are likely to invest through certificates and other derivatives and are increasingly examining such investments for their portfolios.
Since August, special funds for professional investors have also been allowed to invest up to 20 percent of the fund volume in crypto assets. The simplified entry into the market segment for institutional and private investors is considered to be a significant influencing factor for the Bitcoin price gains between autumn 2020 and the beginning of this year, said Sören Hettler, analyst at DZ Bank to Bloomberg.
At the beginning of the year, the German financial regulator BaFin warned against crypto values in the form of direct investments or derivatives that track the price trend. In any of these investments, consumers could suffer significant capital losses. Hettler also urges caution. A commitment remains risky, especially due to the enormous price fluctuations. They could still be useful as an addition to a portfolio.
Bathe told Bloomberg that Union Investment will not launch any new funds, but will only add such assets in small amounts. It is important that the risk profile of the respective fund does not change. Bitcoin are well suited for the diversification of portfolios because they often have no correlation to traditional asset classes in the long term.
The increasing institutional investment opportunities are celebrated as an accolade by crypto fans. However, they also harbor a danger. While the crypto fans remain more or less exclusively in the sphere, investors see them in the context of a portfolio. Should a financial crisis shake the traditional markets, this could quickly spill over to the crypto sphere. In principle, increased investing in crypto assets runs counter to the desire to invest independently of the securities markets.
Although Union Investment apparently wants to invest very moderately, it does not mean that professional investors will continue to invest moderately once the dam is broken. Experience has shown that all security concerns are gradually falling victim to the competition for income. This is the stuff that financial crises are made of: When (crypto) assets are bought on credit, for example, and then demand slackens, for example because monetary policy becomes more restrictive and price gains are no longer sufficient to cover financing costs.
The Bitcoin price had risen significantly from less than 50,000 to more than 52,000 dollars since Sunday morning, but then suddenly fell by 1,000 dollars for no apparent reason.
However, Union Investment is probably less responsible for the price rally. A development in El Salvador is much more boosting the market: The Central American state is the first country in the world to introduce Bitcoin as legal tender. Accordingly, every merchant who is technically capable of doing so must accept Bitcoin. Taxes can also be paid in the cryptocurrency.
No capital gains tax should be levied on the exchange of Bitcoin. The exchange rate to the US dollar, which is used in El Salvador as an official means of payment instead of a local currency, is to be decided freely by the market. According to President Nayib Bukele, anyone who downloads the “Chivo” digital wallet receives a starting credit worth 30 dollars. There should also be 200 “Chivo” ATMs.
According to a nationwide survey by the Universidad Centroamericana (UCA) with almost 1,300 participants in August, around 70 percent of Salvadorans reject the Bitcoin law. Around the same number of people had imprecise ideas about Bitcoin: only 4.8 percent of those surveyed correctly defined it as a cryptocurrency.