PGIM Is Not a Crypto Fan

PGIM is a $1.4 trillion global investment business. Its CEO David Hunt feels that cryptocurrency is a bad choice for many people looking to make a little extra money here and there.

PGIM Doesn’t Want to Offer Crypto

Hunt points to the recent crash and the subsequent selloffs that have occurred in the space as the reasoning behind his feelings. In an interview, he states:

Three things need to be true for us to add an asset class into a portfolio. The asset needs a clear regulatory framework, it needs to be an effective store of value, and it needs to have a predictable correlation with other asset classes. Cryptocurrency currently meets none of these three criteria.

In a recent paper, PGIM had several financial investing experts in the fields of real estate, private debt, equity, and fixed income talk about crypto and discuss its potential prowess and risks. They all commented that crypto offers few advantages for institutions while having more risk than virtually any other investment tool out there.

Some of the reasons Hunt and his constituents can’t get into crypto is because it does not serve as an inflation hedge in their minds. While this has been the argument since mid-2020, Hunt and his associates have pointed out that inflation is occurring on a global scale right now, yet bitcoin continues to sink into oblivion. He also said that there is very little regulation in place designed to protect investors, and he is worried about the environmental impacts of mining.

Shehriyar Antia – head of thematic research at PGIM – explained:

Cryptocurrency may be a heroic quest to build a viable, decentralized, peer-to-peer payment system, but its pricing is based on speculative behavior rather than a fundamental thesis around its value or utility. Furthermore, with little evidence to support it as an effective inflation hedge or safe-haven asset, we see no reason for cryptocurrencies to be a part of institutional portfolios.

The Technology Is Cool; the Asset Is Not

Taimur Hyat – chief operating officer at PGIM – also threw some verbiage into the fray, commenting:

Cryptocurrency gets all the breathless hype, but it’s the underlying technology where we find the most interesting investment opportunities. Firms that enable real-world blockchain applications like clearing and settling transactions, preventing fraud, and tokenizing real assets offer significantly greater creation of value over the next decade. The old axiom applies — when there’s a gold rush, invest in shovels and pickaxes.

Bitcoin is experiencing one of its worst points in history. The currency – at the time of writing – is trading for about $28,000 per unit, meaning it has lost roughly $40,000 from its all-time high accomplished in November of last year. During that month, the currency was trading for about $68,000. Thus far, 2022 is looking eerily similar to 2018, which saw prices crash following a stellar year.

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