October 2021
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October 2021

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Should cryptocurrencies be part of investor portfolios?

Bitcoin hit an all-time high of $64,829 in April, rising as much as 30% since the start of the year, when Elon Musk said Tesla would accept the cryptocurrency as payment for its cars. The following month, it more than halved to $30,000, after Musk said bitcoin mining is actually bad for the environment and that Tesla would hold off on accepting it as legal tender for now.

Across the world, governments have sounded the alarm about the speculative nature of trading cryptocurrencies and are now calling for more regulation. The harshest moves have come from China, which earlier this year banned crypto trading and this week ordered bitcoin mines to shut down.

The market value of all cryptocurrencies was about $1.45 trillion last week, as measured by CoinGecko, versus a high around $2.6 trillion last month.

This month, the Basel Committee of Banking Supervision said cryptocurrencies are some of the world’s riskiest assets and told banks that requirements for holding bitcoin and other coins should be far higher than stocks and bonds.

Despite the volatility, cryptocurrencies continue to stir huge interest. Recently El Salvador became the first country in the world to adopt Bitcoin as legal tender, while central banks are exploring digital currencies for the longer haul. Meanwhile, investment banks have restarted trading desks for crypto, which recently received endorsements from hedge fund managers like Ray Dalio and Paul Tudor Jones.

How should investors view these developments? Can we expect the volatility to iron out with more regulations in place? Should cryptocurrencies be part of investor portfolios going forward? AAM contributor Kang Wan Chern spoke to Darius Sit of QCP Capital in Singapore for his views.

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