Willkommen, lieber Bitcoin!
As of today, a law will come into force, authorizing specialized funds (Spezialfonds) to place up to 20% of their holdings in Bitcoin and other cryptocurrencies. This is a significant step forward for the adoption of cryptocurrencies by German financial institutions.
In total, around 4,000 investment funds will now be able to invest in the crypto sector, according to Sven Hildebrandt, CEO of German company Distributed Ledger Consulting (DLC).
“It’s damn huge,” commented Hildebrandt.
According to Bloomberg, however, these Spezialfonds are only accessible to institutional investors such as pension funds and insurance companies. These entities would currently manage around 1,800 billion euros ($ 2,100 billion).
“Most funds will initially remain well below the 20% mark,” said Tim Kreutzmann, cryptoassets expert at BVI, the German fund industry body.
Hypothetically, if only 10% of this capital is found invested in Bitcoin (BTC), this would represent a purchase volume of 180 billion euros.
At the current price of Bitcoin (33,152.63 euros at the time of this writing), such an investment would allow German funds to get their hands on more than 5 million BTC tokens.
But this adoption will not happen in a flash. It is very likely that these funds are only partially exposed to cryptocurrencies, and gradually. Indeed, German financial players are not the type to go all-in on an asset and cultivate a long-term and cautious vision in terms of investment.
👉 On the same theme – Germany recognizes cryptos as financial instruments
Shy breakthrough and fear of volatility
According to Kamil Kaczmarski, financial services advisor at Oliver Wyman LLC, the volatility of digital assets might not be attractive to German investors, who are traditionally very cautious or even conservative.
Historically, institutional funds have been cautious about volatility since the trauma of monetary hyperinflation that hit the economy of the Weimar Republic in 1923. Moreover, it can be noted that in German, the word “shulden” ( “Debt”) has a connotation close to the words “blame” or “guilt”.
This phenomenon is similar to that experienced by the Venezuelan currency in recent years, causing an acceleration in the adoption of cryptocurrencies in the country.
Hyperinflation of the German mark after the First World War
However, the volatility of the mark’s valuation was caused by its inflationary nature, inherent in fiat currencies, coupled with a struggling post-war economy. Bitcoin is not, but its propensity to change value abruptly and impulsively may seem surprising on the surface, creating potential aversion on the part of institutions.
However, it is in no way similar to that experienced by the German mark in the 1920s. These are two volatilities of different natures.
One is the structural consequence of the massive issuance of a currency decorrelated from its standard in a context of economic depression. The other is the consequence of fluctuations in the supply and demand of a decentralized digital asset with a limited and immutable stock.
While the Bitcoin token issuance model is intended to be close to a deflationary concept, would it not be legitimate from a fundamental point of view to take an interest in this asset in order to deviate from the inflationary cycle of fiat currencies? classics?
Bitcoin Money Creation Model (BTC)
German institutions will open up to cryptocurrencies
For his part, Kamil Kaczmarski believes that the Spezialfonds could probably experiment with cryptocurrencies at moderate investment scales, without approaching the 20% threshold, for at least 5 years.
If the adage holds that the appetite comes with eating, what about the attractiveness of German institutional funds to cryptocurrencies?
It is plausible that their appetite for Bitcoin, Ether, and other crypto-assets will grow beyond what we might imagine in the months and years to come.
👉 To go further – The German company SynBiotic buys Bitcoin (BTC) to “protect itself from the devaluation of the euro”
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About the author: Bela Le Tiec
His favorite text: A Cypherpunk’s Manifesto.
His flagship show: Thinkerview.
His favorite artist: Daft Punk.
His goal: to contribute to the education of his contemporaries in blockchain and distributed networks.
All articles from Bela Le Tiec.