5th November 2024 > > Pension funds & BTC.

tl;dr

Here come the pension funds, and a UK one at that! A word of caution ahead of the US election results.

Market Snap

Market Wrap

Mike Alfred made this observation on X:

“Every previous cycle, Bitcoin has made a low price the week of the US election that has NEVER been revisited again. Let that sink in. This week will literally be the last time you can ever buy Bitcoin below $70,000.”

It’s a bold call, and predictions like this can age very badly. But we do all hope he has it spot-on.

Curious Cryptos’ Commentary – And here is another pension fund

Pension fund advisor Cartwright has announced some very exciting news:

https://cartwrightbenefits.co.uk/news_press_november_2024.html

Let me quote at length:

“Cartwright, the pension specialist for defined benefit and hybrid schemes, today announced a pioneering bitcoin allocation into the investment portfolio of a UK Pension Scheme. The first of its kind in the UK, the allocation took place in October after a rigorous training and due diligence process. It saw Trustees of the unnamed scheme choose to make a 3% bitcoin allocation, reflecting the scheme’s relatively long investment time horizon. Bitcoin’s asymmetric return profile enables a small allocation to have a big positive financial impact, protected by the extensive risk management at both scheme and asset levels.”

This is just lovely on two counts.

Firstly, pension funds are by nature very conservative, so crypto adoption will be mightily slow in this sector. At the same time they are very sheep-like – as more and more pension funds adopt BTC (as they will) that encourages the others to follow. Just a trickle at first, then a flood.

Secondly, that ridiculous price prediction of mine of $1.2mm per BTC is predicated on investment funds allocating 3% - 5% of AUM to cryptos, almost entirely BTC. Some people laughed at me when I first said that. Well, this one is bang in line, and not for the first time.

The press release finishes on an up-beat message which will be familiar to readers of the CCC:

“Cartwright expects an institutional adoption curve similar to when pension schemes started investing in equities in the 1970s, or high yield bonds in the 1980s, or LDI in the 2010s. It can take some time for institutional investors to get comfortable, but then it becomes reputationally risky to not have considered that asset as a natural part of optimal portfolio construction.”

No pension fund has appetite for reputational risk.

…

The political and technocratic elite in the UK are not happy about this news, but there is simply nothing they can do to stop the crypto challenge to their previously impregnable fortress.

Curious Cryptos’ Commentary – Price predictions

AllianceBernstein has predicted a price of $80,000 - $90,000 in the immediate aftermath if Trump wins, with a sell-off in the case of Harris victory. In either situation, it sees a price of $200,000 in 2025.

This is a common view, though the numbers may differ between different forecasters.

Which does suggest to me that the exact opposite is quite likely to happen, in the very short-term.

Investors need not worry, for we are comfortable with large sell-offs allowing us to accumulate at better prices. It is the speculators who will get hurt, especially ones with leveraged exposure, a mistake that no-one here will make.