Pension funds, which have traditionally been cautious in their investments, are beginning to enter the world of cryptocurrencies. With Bitcoin hovering around the $100,000 mark, pension funds in the US, UK, and Australia are looking to capitalize on the potentially high returns, Ars Technica reports.
Among the most active participants are the pension funds of Wisconsin and Michigan, which are among the largest holders of U.S. exchange-traded funds (ETFs) focused on cryptocurrencies. These funds invest directly in Bitcoin and Ethereum, providing trustees with a regulated path to entry into this volatile market. Wisconsin's investment in BlackRock's Bitcoin ETF is currently valued at approximately $155 million, while Michigan's holdings in Grayscale's Ethereum ETF and 21Shares' ARK Bitcoin ETF have also shown significant growth.
The shift toward cryptocurrencies is fueled by the rapid growth of Bitcoin, which doubled in value last year, as well as the election of a pro-cryptocurrency administration in the United States. President-elect Donald Trump has pledged to make the US a global leader in Bitcoin and ease regulatory restrictions in the industry, which has increased interest from various institutions.
This is in stark contrast to the situation two years ago, when high-profile failures in the cryptocurrency market left some pension funds with heavy losses. For example, the Canadian pension fund Ontario Teachers' Pension Plan wrote off $95 million invested in FTX, while the Caisse de dépôt et placement du Québec lost $150 million in Celsius Network.
Despite the risks, supporters argue that institutional adoption of cryptocurrencies is inevitable as regulatory barriers are relaxed. Alex Pollack of 21Shares, a Swiss cryptocurrency product provider, predicts that interest in this area will grow. In the UK, consultancy Cartwright recently helped a £50 million pension fund make a direct investment in Bitcoin. This move, though small (£1.5 million), shows a growing willingness to use cryptocurrencies to address funding shortfalls.
The Australian company AMP has also joined this trend, using Bitcoin futures to increase portfolio returns. “Crypto is risky, new and not yet fully proven, that it had become too big, and its potential was too great to continue to ignore,” said Steve Flegg, senior portfolio manager at AMP.