Bitcoin is enjoying a plenty of attention lately due to the rally in its price driven by its usage as frictionless payment solution and the catalyst: the ambitious plans of the Winklevoss brothers to launch the first bitcoin ETF. Friday, 10th March though was the day that SEC rejected the brothers’ ETF application, which could have been a ‘revolution’ for the digital currency in the investment space, like the first Gold ETF, due to the anticipated inflow of new institutional capital. The same day, after the ETF disapproval, the price of Bitcoin plunged to levels around $1000, which constituted an almost 18.5% decrease intraday. Bitcoin price recovered immediately and currently trades around $1230, proving that the drivers of demand for the digital currency are strong regardless of the launch of an ETF. We are living in the age of the machines, where investors are looking for fintech, artificial intelligence and machine learning supported products to source uncorrelated alpha for their investment portfolios. This perspective will examine the Bitcoin and CTA market to analyze its effect on investors’ portfolios.
There are hundreds of different cryptocurrencies, but only two managed so far to distinguish themselves and establish a market. Bitcoin is the most capitalized with current market capitalization being around $20bn. Ethereum, its only relevant peer so far, has a market cap of around $2bn. Bitcoin is the main player in the cryptocurrency spectrum and its growth is significant over the last 3 years. Since 2014, $15bn of new capital has boosted the growth of bitcoin as a new asset class. CTA AuM has risen by $22bn since 2014 and is currently at an all-time high of $340bn, proving that machine related strategies are here to stay while attracting new capital allocations.