BlackRock, the company responsible for managing over $6 trillion USD in assets, recently had its leading strategist expand on thoughts regarding the growing cryptocurrency asset class — and the long-term potential of blockchain technology.
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Warming to Blockchain’s Potential
Blackrock’s global chief investment strategist Richard Turnill is no stranger cryptocurrencies. Back in July, he compared the price increases of bitcoin and Ethereum’s ether to previous market bubbles. Now some months later, he sees how the blockchain can have disruptive potential for a wide range of industries — but remains cautious of their long-term investment validity.
In BlackRock’s latest Global Weekly Commentary, he expanded on his and the firm’s thoughts on this emerging asset class.
“We see cryptocurrencies potentially becoming more widely used in the future as the market matures… Similarly, blockchain needs to overcome significant hurdles to reach its promising future.”
Citing their inherent volatility and unregulated nature, Turnill cautioned that the average investor needs to understand: just because blockchain technology has potential to reinvent lagging processes in industries such as pharmaceuticals and financial services, it doesn’t mean they have a place in mainstream investment portfolios anytime soon.
Specifically, he mentioned bitcoin’s rise to almost $20,000 USD in value in December to its most recent fall in January where it has stabilized around $10,000. Despite Bitcoins fundamentals remaining relatively the same that is not something a normal investor has experience dealing with.
Adventurous Investors Only
Acknowledging the fact that distributed ledger technologies like the blockchain can be valuable, Turnill added that any disruption is one that he believes regulators and central banks will play a key part in and as a result means that cryptocurrencies come with a high degree of uncertainty. The commentary added:
“For blockchain technologies to redesign the global financial landscape, adoption at scale would require a massive shift in software development and a well-constructed maintenance model… and for now, we believe they should only be considered by those who can stomach potentially complete losses.”
Regardless of the irrational optimism found in cryptocurrency-focused Telegram channels or subreddits, Investors should find solace in the positive but genuine remarks by BlackRock’s investment lead.
Furthermore, they should decide if cryptocurrencies with their high volatility are the correct investment choice for them based on their own risk tolerance and investment horizon.
As the digital asset landscape continues to develop, it will be interesting to see how global asset managers such as BlackRock respond to improvements in the underlying blockchain technology and increasing retail demand.
What are some of the hurdles you believe cryptocurrencies need to overcome before they have a place in the mainstream investors portfolio? Let us know any that cross your mind.
Images via Climate Change News