BlackRock, the world’s largest asset manager with $6.28 trillion under management at the end of December 2017, recently weighed in on the cryptocurrency space. According to the firm’s global chief investment strategist, Richard Turnill, cryptocurrency investors should be prepared to lose everything.
Turnill’s thoughts came in BlackRock’s weekly report. It noted that cryptocurrencies’ high volatility, fragmented markets, and lack of regulations stopped them from becoming a part of mainstream investment portfolios. The strategist added that their volatility makes recent US stock market turbulence “almost look placid.”
The report reads:
“We see cryptocurrencies potentially becoming more widely used in the future as the markets mature. Yet for now we believe they should only be considered by those who can stomach potentially complete losses.”
BlackRock’s report compared the volatility in US stocks, gold, and in the top three cryptocurrencies. Ripple was the most volatile, followed by Bitcoin and then Ethereum. While Bitcoin saw its value drop from nearly a $20,000 high to little under $7,000 in a few months, Ripple dropped from a $3 all-time high to about $0.7 in about the same period.
It noted that cryptocurrencies have, so far, been unable to protect investors from drops in the stock market. This, despite arguments for investing in cryptocurrencies given their low correlation to traditional financial products.
While BlackRock doesn’t seem to be interested in the cryptocurrency market, it added the market has to overcome several obstacles to reach wider adoption. Per the firm, a global regulatory framework on cryptocurrencies could soon emerge.
BlackRock on blockchain technology
The asset management giant further revealed that blockchain technology, underlying cryptocurrencies, has potential. It would, however, require a “massive shift” in development for broad adoption.
This adoption would not be seamless and would need the help of regulators and central bankers. Explaining his views on the potential of blockchain technology, Turnill wrote:
“Take the financial industry. A blockchain-based, single shared financial database could eliminate inefficiencies and risks associated with human processes, but adoption at scale would require a massive shift in software development and a well-constructed maintenance model.”