Cryptocurrencies find their way into public pension funds
New market analysis from ETC Group, a London based investment firm focused on institutional grade exchange traded products within the cryptocurrency and digital asset ecosystems. Visit www.etc-group.com for more information.
February 03, 2022 — LONDON–(BUSINESS WIRE)–ETC Group (www.etc-group.com) has released its latest research on Bitcoin and Ethereum as part of its regular series of market reports.
Highlights of the reports include:
- China’s share of global Bitcoin mining dropped from 75.6% in September 2019 to 0% in August 2021; the US was the biggest beneficiary of displaced miners, with Foundry USA growing its share from 7.7% to 16.5% since October 2021.
- The Houston Firefighters Relief and Retirement Fund and CDPQ, the second-largest public pension plan in Canada, lead the way with the first US and • Canadian public pension fund investments with $25m and $400m invested in crypto assets respectively.
- Institutions including Goldman Sachs and JP Morgan reaffirmed their confidence in Bitcoin market growth in 2022 as TP ICAP started trading cryptocurrency derivatives for the first time in January 2022.
- Ethereum NFT sales rocketed by 15,000% while Ethereum DeFi jumped 764% to over $150bn TVL.
Bradley Duke, CEO of ETC Group comments:
“In these times of rampant inflation the search for an inflationary hedge has become even more important. Even stable Western economies have joined the likes of Turkey in seeing increasing inflation while Gold, traditionally the go-to store of value in times of economic troubles, has failed not only to attract new investors, but even to maintain its store of value losing around 4% of its value in 2021. As a result we’re seeing more institutions, including pension funds and others pushing into the crypto markets to try to increase their value over the long term. Meanwhile market infrastructure is expanded and strengthened by the involvement of players like TP ICAP. Despite the current leaning bearish market, digital assets are clearly here to stay.”
Excerpts from the ETC Group’s report The State of Bitcoin
Institutions, pension funds drive Bitcoin adoption
Recent Bitcoin price weakness and continued volatility across the asset class belie a wave of institutional adoption that accelerated throughout 2021, ETC Group research shows.
Perhaps the most striking example of institutional adoption came from what is understood to be the first public US pension fund detailing a direct investment in Bitcoin, 12 years after Bitcoin’s creation and six years after the asset became widely available to the general public through regulated exchanges .
The Houston Firefighters Relief and Retirement Fund (HFRRF) was established by US state statute in 1937 and its stated mandate is to “[practice] the traditional philosophy of asset allocation by maintaining percentage ranges of the assets in domestic stocks, international stocks, bonds, cash, private equity, alternative investments and real estate. Using an asset allocation forces the Fund to be a disciplined investor”
The pension fund, which looks after the retirement wealth of 6,600 firefighters and their families, officially crossed the Rubicon on 21 October 2021, purchasing $25m in Bitcoin and Ether.
As ever, the question of whether to allocate institutional capital to Bitcoin is down to the particular preference of an investment committee. But the asset is becoming ever more closely integrated with world financial systems and has demonstrated the potential for outsize returns over time. While $4bn is a large amount of capital to deploy, it is relatively small in terms of global wealth management.
Excerpts from The ETC Group’s report The State Of Ethereum
Analysis of network data by ETC Group shows that NFT sales on Ethereum have skyrocketed by 15,000% year on year.
Non-fungible digital tokens were undoubtedly the story of 2021, producing tens of billions of dollars in sales and becoming the first true retail megatrend in crypto.
These blockchain-based digital items are individual and unique by design, as opposed to cryptocurrencies whose units are interchangeable. Most NFT projects are built on the Ethereum blockchain in the form of ERC-721 or ERC-1155 tokens.
They can store data including images, GIFs, videos or even music. Their high level of programmability also means that artists and creators can set conditions: for example offering buyers downloads of other material as a reward, or giving themselves sell-on fees when NFTs are resold, for example.
ETC Group predicted in Q3 2021 that NFTs would be the ‘Trojan horse’ to bring crypto to its first billion users, and we are more confident than ever, given the data.
Our analysis shows that sales across Ethereum-based NFT platforms grew from $31.9m in Q4 2020 to $4.85bn in Q4 2021.
The Wall Street Journal reported an exclusive on 6 January 2022 that Gamestop (NASDAQ:GME) was entering cryptocurrency and NFT markets in a bid to switch from meme stock short-squeeze candidate to truly profitable enterprise, and hiring more than 20 people to run this new division.
And $440bn market cap Samsung (KRX:005930) has made its ownentry into the space, announcing on 3 January 2022 three TV models for 2022 including extensive support for NFTs, with a screen-based explorer, galleries and marketplace aggregator, while the shoe has dropped for one other venerable institution: the Associated Press.
Access the complete report here.
Cryptocurrencies are highly volatile, and your capital is at risk. Disclaimer: https://bit.ly/etcdisc
About ETC Group
ETC Group develops innovative digital asset-backed securities including BTCetc – ETC Group Physical Bitcoin (BTCE) and ETHetc – ETC Group Physical Ethereum (ZETH) which are listed on European exchanges including XETRA, Euronext, SIX, AQUIS UK and Wiener Börse. ETC Group launched the world’s first centrally cleared Bitcoin exchange traded product (ETP) in June 2020 on Deutsche Börse XETRA, Europe’s largest ETF trading venue. ETC Group is continuously working on expanding its suite of institutional-grade cryptocurrency backed ETPs, providing investors the opportunity to gain exposure to Bitcoin, Bitcoin Cash, Ethereum and Litecoin based digital assets on major European stock exchanges. ETC Group’s securities are marketed by HANetf.
