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Alternative investment industry sees investment in cryptocurrencies as highly speculative

Thursday, December 07, 2017
Opalesque Industry Update - In the eight years since bitcoin was created the cryptocurrency has gone from being an obscure concept familiar only to technology specialists, to something that is now part of the American vernacular. And with some industry experts predicting that bitcoin will pass the $10,000 mark before year end; the Bank for International Settlements acknowledging that the world's central banks will soon have to decide whether or not to issue digital currencies of their own as an alternative to cash; and banks around the world scrambling to find ways to take advantage of bitcoin's unique blockchain ledger system to secure financial transactions, it is clear that bitcoin and cryptocurrencies are going to have a lasting impact on the financial world. Given the rising interest in bitcoin, blockchain and cryptocurrencies, The New York Alternative Investment Roundtable recently conducted a survey touching on the topic.

"It's like the Internet in 1996 right now with blockchain -there is a very valid business application in every industry right now for blockchain," Lanzilli told attendees at the Roundtable's November event. "It is so sound for a general ledger purpose, that's why you are able to, with 100% trust, build out currency with blockchain."

Added Middleton, responding to a question about whether we are in the middle of a bitcoin bubble, given that 120 hedge funds alone are now focusing solely on cryptocurrencies and ICOs (initial coin offerings): "This is a paradigm shift -you have every 50, to 100 to 200 years a transformational paradigm shift where one technology is obsolesced by another… this paradigm shift, I feel, is the most significant of modern times," he said. "Imagine 15 years in the future when nobody's heard of living without blockchain technology or DLT [distributed ledger technology] and everything is done through the blockchain -you'd never need a third party, you'd never need a trusted party and that's what I see going forward… the question that needs to be asked is what business technologies are going to be obsolesced by this technology, versus 'is this a bubble.'"

Members of The New York Alternative Investment Roundtable believe that, at this point in time, investing in cryptocurrency is highly speculative and the majority of Roundtable members have yet to invest in cryptocurrency. The New York Alternative Investment Roundtable is the new name of what was formerly The New York Hedge Fund Roundtable -a change made to better reflect the organization's focus on promoting ethics and best practices within the entire universe of alternative investments.

New York Alternative Investment Roundtable members had the opportunity to weigh in bitcoin and blockchain both at the Roundtable's November event, as well as through an online electronic poll.

*Of the respondents to this survey, 34% were fund managers; 18% were allocators; 10% were risk management or trading; 27% were service providers; and 11% were other industry participants.

Following are some of the key findings of the survey:

  • When asked whether or not they have ever purchased cryptocurrency, 24% of respondents said that they have, while 76% haven't. Of those who have purchased cryptocurrency, none have ever used it in a transaction.

  • 11% of respondents currently have 25% or less of their portfolio in cryptocurrency, while 89% have yet to invest in cryptocurrency.

  • When asked if the recent volatility of bitcoin, which included a 10% drop in its value, is an indication that investment in cryptocurrency is highly speculative, 61% of respondents said they strongly believe it is, while another 31% think it is likely an indication that it is speculative and 8% are unsure.

  • Asked whether they would ever convert real assets into an e-currency, 10% of respondents said they would never do so; 13% said they are unlikely to do so; 28% said they would possibly do so; 7% said they would likely do so and 42% were uncertain.

  • When asked whether state and federal regulators should drop their suit against the Office of the Comptroller of the Currency over its intention to grant special purpose National Bank Charters to fintech companies, especially in the e-currency space, 12% of respondents said they strongly believe the suit should be dropped; 17% believe it should be dropped; 14% do not believe it should be dropped; 6% strongly believe it should not be dropped and 51% are uncertain.

  • 87% of respondents believe that blockchain tech solutions will benefit both the buyside and the sell side, while 13% believe that blockchain will only benefit the sell side.

What do you think?

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