Diversification to allocate funds to Bitcoin is an “opportunity that [fiat] money cannot buy”, Singapore-based DBS Bank says in a report released today, noting that investors will also require “full mental acceptance that losing these funds would be well within the realm of possible outcomes.”
- In the report, entitled “Demystifying the enigmatic cryptocurrency, DBS Chief Investment Officer Hou Wey Fook wrote: “Bitcoin has become history’s most polarizing asset after the tulip in the mania of the 1630s … While technological adoption, an increasingly digitalized economy, and institutional acceptance are all narratives that have fueled the surge in Bitcoin, undergirding it all is the longstanding trend of monetary debasement that has plagued not just the U.S., but various other major economies around the world as well.”
- “To the bears, it is worth considering that Bitcoin’s blockchain technology is indeed revolutionizing finance as we speak, while characteristics of decentralization, security, limited supply, and digital nature render it unique properties that are near impossible to find substitutes for,” Hou wrote. “To the bulls, the future is still rife with uncertainty with Bitcoin’s scalability, volatility, regulatory, and geopolitical risks all serving as roadblocks to widespread adoption.”
- The report noted that Bitcoin had exhibited generically low correlations with a broad range of asset classes, and that despite extreme bouts of volatility, allocating even a small portion of a portfolio into Bitcoin would augment the risk-return profile of an investor’s holdings.
- With the exponential growth of cryptocurrencies — the cryptocurrency market is currently valued at over US$1.8 trillion — new investment patterns are emerging and traditional banks are stepping up. Earlier this month, DBS introduced a trust service to allow its private banking customers to integrate cryptocurrencies into their wealth succession plans. The service marks an expansion of the bank’s cryptocurrency offerings following the launch of the DBS digital exchange last December.