In an interview with CNBC on June 14, legendary investor Paul Tudor Jones sounded the inflation alarm. After last week’s Consumer Price Index (CPI) report showed that US inflation reached a 13-year high, the founder of Tudor Investment asked for 5% of Bitcoin wallets (BTC) to be allocated.

Mutual fund companies organized by assets under management, denominated in US dollars. Source:
Combined with the 50 largest asset managers in the world, they control $ 78.9 trillion. Only 1% of cryptocurrency investments reach $ 789 billion, which is more than Bitcoin’s full market value of $ 723 billion.

However, there is a fundamental misunderstanding of how this industry works, and this holds back the 1% allocation, let alone the 5% allocation.

Let’s explore some of the biggest obstacles that the traditional financial sector must overcome before we truly become the bitcoin monkey.

Obstacle 1: perceived risk
Investing in bitcoin remains a major obstacle for large fund managers, especially given their perceived risk. On June 11, the US Securities and Exchange Commission (SEC) warned investors about the risks of trading bitcoin futures, citing market volatility, lack of regulation and fraud.

While many stocks and commodities have similar or even higher volatility over 90 days, the agency is in some ways still focused on bitcoin.

DoorDash (DASH), a US-listed company with a turnover of $ 49 billion dollars, has a volatility of 96% compared to 90% for Bitcoin. Meanwhile, Palantir Technologies (PLTR), a US $ 44 billion technology company, has 87% volatility.

The second obstacle: indirect impact is almost impossible for American companies.
Most of the mutual fund industry, especially multi-billion dollar managers, cannot afford to buy physical bitcoins. There is nothing specific about this asset class, but most pension funds and 401,000 cars do not allow direct investment in physical gold, art or agricultural land.

However, these restrictions can be circumvented by using exchange traded funds (ETFs), exchange traded securities (ETNs) and exchange traded funds. Cointelegraph has previously explained the differences and risks associated with ETFs and trust funds, but this is just a scratch on the surface because each fund has its own rules and restrictions.

Obstacle 3: Fund regulation and officials can discourage the purchase of bitcoins
Even if the fund manager has full control over investment decisions, he must comply with the rules for each individual vehicle and monitor the risk control measures set by the fund manager. Adding new instruments such as CME bitcoin futures, for example, may require SEC approval. Renaissance Capital Medal funds faced this problem in April 2020.

Those who choose CME Bitcoin futures such as Tudor Investment, must continuously renew their position before the expiration date of one month. This problem applies to both liquidity risk and error tracking in the underlying instrument. Futures contracts are not intended to be long-term transfers, and prices deviate significantly from conventional spot exchanges.

Obstacle 4: The traditional banking industry is still a conflict of interest.
Banks are a major player in this area, for example JPMorgan, Merrill Lynch, BNP Paribas, UBS, Goldman Sachs and Citi are some of the largest fund managers in the world.

The relationship with the rest of the asset managers is strong because the banks are the respective investors and distributors of these independent funds. This confusion goes further because the same financial conglomerates dominate stock and debt offerings, which means that they ultimately decide to use mutual funds in such transactions.

While Bitcoin is not yet an immediate threat to this gigantic industry, a lack of understanding and risk aversion, including regulatory skepticism, keeps most of the $ 100 trillion professional fund managers in the world away from the pressure of entering a new asset class.

Source: CoinTelegraph