Commentary from Pictet Asset Management on Cryptocurrencies

January 15, 2021

As an asset class we view this as still highly speculative. We think most investors who buy cryptocurrencies (referred to as “crypto” below) have lost faith in central bank policy to a certain extent. This means that crypto becomes an asset class to hedge against potential inflation just as gold is viewed by many as a hedge against inflation as well. Another segment of investors views crypto as a new and upcoming paradigm shift that will change the way we interact financially. This is more about the technology behind crypto and the possibilities to increase speed and safety, but unfortunately there is also an aspect of less financial and regulatory oversight. Lastly, a part of the investor community really just looks at crypto for the outsized moves and the ability to play these ‘waves’ and momentum. 

In the end, not all cryptocurrencies will be attractive for the investment community. A few will survive and thrive (based on more widespread acceptance and robust security) but will also slowly be brought into the ‘fold’ of normal financials. You can already open accounts at many banks in cryptocurrencies. In our opinion, a normal progression from a nascent industry to a more mature and accepted state. 

The blockchain technology behind cryptocurrencies: this is for us the most interesting part as we can invest in companies that use this. The technology can be used to reduce risk, time lags and costs of doing business. The electronic payment stocks that we have in Manulife Global Thematic Opportunities Fund/Manulife Global Thematic Opportunities Class use the technology to speed up the increasing number of transactions they handle, improve the risk management and lower costs. We expect the advantages of the technology to become increasingly visible for us as consumers through same day money transfers, lower costs of international transfers etc. Fidelity National Information Services Inc. and Visa Inc. are examples of holdings that use the technology.