Alexandra Janssen: «Even Bitcoin Fans Should Diversify Their Investments»
Bitcoin continues to break record after record, fueling interest among a broader investor base and strengthening the conviction of its hardcore supporters. The price reflects the high expectations for blockchain technology, says Ecofin CEO Alexandra Janssen. She advocates for a financial system that preserves freedom.
Even though Bitcoin is currently trading slightly below its all-time high of over $122,000 from Monday, its performance over recent years has been impressive and is silencing more and more skeptics. ¨
In an almost countercyclical move amid the boom, finews.asia confronts economist Alexandra Janssen with critical questions. She is the CEO of Swiss wealth management firm Ecofin.
Alexandra Janssen, there is much talk about institutional investors like pension funds considering adding Bitcoin to their asset allocation. Private investors and investment vehicles such as Exchange Traded Products (ETPs) also seem to be investing heavily in Bitcoin. Does this picture of the buyer side align with your observations?
Interest in Bitcoin and blockchain technology is high. Among private clients, this often leads to a Bitcoin or crypto allocation in their portfolios. On the institutional side, the interest often leads first to an examination of the technology, but actual investments in Bitcoin by institutional investors in Switzerland remain relatively rare.
The reason their share in ETPs appears high compared to the overall market is that governance requirements often prevent institutions from holding Bitcoin in self-custody. Among private investors, self-custody is actually a key factor – precisely because it offers independence from the traditional financial system.
«We still observe relatively few Bitcoin investments by institutional investors in Switzerland.»
Crypto specialists and even some banks have recently raised their price targets again. But where there are buyers, there must also be sellers – especially since the number of Bitcoins is capped at around 21 million. Who is willing to part with their coins during such a strong upward trend?
There are various groups of sellers with different motivations. In some cases, they are short-term investors or arbitrageurs. More commonly, they are miners who sell part of their Bitcoin holdings to fund ongoing operations.
Long-term holders also sell in order to diversify. These investors want to allocate part of their wealth held in Bitcoin into other, including traditional, assets.
If such investors are now selling part of their large Bitcoin holdings: is that a sensible move from a risk management perspective?
Yes. Even investors who are deeply convinced of Bitcoin’s potential know they cannot predict the future. It’s wise for them to diversify their assets.
We see this in our own work as well: we not only support clients looking to build a robust portfolio through diversification of traditional assets, but also those aiming to expand their crypto portfolios with traditional investments.
«The 'Greater fool' theory – that savvy investors offload Bitcoin to uninformed latecomers – does not hold up.»
Couldn’t the phenomenon also be interpreted as insiders cashing out before a bubble bursts, leaving latecomers with the losses?
Wallets that have been active for a very long time have not sold significantly more Bitcoin this year compared to previous years. So the «greater fool» theory – that sophisticated investors are exiting just in time and passing assets to less informed buyers – does not hold up.
What we are seeing are rebalancing movements: after price increases, large wallets tend to sell. That’s entirely consistent with an economic view of how these investors manage risk.
The Bitcoin price is often interpreted as a barometer of distrust in the traditional financial and monetary system. But that very system is now trying to normalize and integrate Bitcoin as an asset. Isn’t that contradictory?
The price is rising not just because people believe in Bitcoin. It also reflects expectations surrounding blockchain technology. The importance of the tech aspect becomes clear when you observe that Bitcoin and tech stocks tend to lose value at similar times. So far, Bitcoin has not been able to fulfill its role as «digital gold». The price gains have naturally spurred interest.
That’s not necessarily a contradiction, but rather the typical path of a potentially successful technology. What does seem ironic is when Bitcoin maximalists celebrate the adoption of Bitcoin by governments
«It does seem ironic when Bitcoin maximalists cheer the state-level adoption of Bitcoin.»
While many investors are simply attracted by Bitcoin’s performance, the hardcore community uses radical rhetoric, claiming all other asset classes are obsolete and the end of fiat money is near. Is this kind of missionary zeal new in the investment world?
Bitcoin maximalists share much with the gold bugs of the 1970s or certain investors during the dotcom era, who foretold the end of traditional companies.
But many fans argue in a very nuanced way and, despite their enthusiasm for Bitcoin, recognize the importance of other innovations in blockchain and decentralized finance.
Is this «Bitcoin is the solution to everything» mindset helpful because there’s a kernel of truth to it or is it more of an obstacle because it hampers rational discussion?
Radical viewpoints can be helpful to challenge the status quo. There are major issues in today’s financial and monetary system that could theoretically be addressed through modern technologies. But dogmatic thinking often prevents a more nuanced discussion of the current system. We’re not building the financial system from scratch.
We need to initiate meaningful reforms based on where we are now. That requires deep understanding of today’s system, openness to technology, and a commitment to building a better financial and monetary system – one that is future-ready and preserves individual freedoms.
