EU capital managers give 5 reasons why
The ongoing cryptocurrency winter and massive collapses in the industry do not mean that digital assets such as Bitcoin (BTC) are doomed, according to a major European asset manager.
Despite BTC failing to protect investors against rising inflation in 2021 and 2022, Bitcoin’s limited supply could still attract more attention if inflation remains above central banks’ targets, according to investment managers at Paris-based investment manager Amundi.
On March 2, Amundi’s chief investment officer Mortier Vincent and macroeconomist Perrier Tristan released a thematic article analyzing the state and perspectives of the crypto market. The director argued that Bitcoin has not acted as an inflation hedge over the past two years due to “dramatic increases in policy and market interest rates,” which pressured “all asset classes.”
According to the paper’s authors, nominal interest rates are likely to stop rising or even fall if inflation is high but not rising. Such a situation would potentially lead to a bull market for Bitcoin, Amundi investment managers said, stating:
“This is a much more favorable environment for an asset whose supply is limited and which has essentially a long duration, as the main attraction is its future potential rather than its current status.”
The analysts also gave five reasons why the recent setbacks in the crypto industry – including the collapse of firms like FTX or Celsius – may not mean the end of cryptocurrencies.
The recent crisis is likely to bring more realistic expectations from the industry and “separate the wheat from the chaff,” Amundi executives said. They compared crypto to blue-chip technology stocks, which also experienced wild price collapses before starting to thrive. The analysts also noted that the current market decline remains in line with Bitcoin’s historical price cycles.
Vincent and Tristan mentioned Ethereum’s successful transition to a proof-of-stake blockchain, highlighting the industry’s ability to reduce energy consumption. The executives also noted that the key value propositions of crypto such as decentralization and immutability of transactions have not been affected by the crisis.
Another reason is that prominent companies in finance and other industries haven’t stopped expressing their interest in crypto entirely, with heavyweights like Blackrock buying a stake in Circle in 2022.
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Ultimately, regulation is likely to have a more positive impact on the industry, despite certainly causing temporary price setbacks, the analysts argued. They emphasized that many regulators have gradually preferred not to impose a general ban on crypto after several attempts, and that advanced economies now see it as an opportunity.
Despite expressing some degree of bullishness towards the future of crypto, Amundi’s investment managers still noted that the real financial utility of crypto “still needs to be fully confirmed.” It would need widespread use of public blockchains in the real economy and the associated non-speculative demand, the experts noted.
