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Odaily Translator | Nian Yin Si Tang

, by Sujata Rao & Lynn Thomasson

Odaily Translator | Nian Yin Si Tang

Institutional investors have begun to lose interest in cryptocurrencies even before the latest week. And the sudden downfall of Sam Bankman-Fried's (SBF) FTX.com may have permanently damaged the prospect of cryptocurrencies being included in mainstream investment portfolios.

While there are still many “die-hards” in the industry, many professional fund managers say the case for using cryptocurrencies as a portfolio diversification tool or digital gold no longer holds water. They said that if something goes wrong, the losses are too high, and the market structure is too risky.

"It's clear that it (cryptocurrency) is not going to find a place in institutional asset allocation," said Hani Redha, multi-asset portfolio manager at London-based Pinebridge Investments. A potential asset class to have in strategic asset allocation, but investors are completely dismissing it now.”

The implosion and scandals of the past few months have somewhat weakened the main arguments of cryptocurrency proponents and all but erased the concept of Bitcoin as a safe haven in turbulent times. But all of these events — from TerraUSD’s debacle to Celsius’ bankruptcy — outweighed the fact that even FTX, which until recently was considered one of the best blue-chip stocks in the cryptocurrency space, was unreliable.

Salman Ahmed, chief investment strategist at Fidelity International, noted that the FTX debacle "has raised questions about the viability of the cryptocurrency ecosystem." Fidelity International manages $646 billion in assets in London. “It was always hard to justify including cryptocurrencies in (mainstream investing), and that setup is now under more pressure,” Ahmed said.

His company launched a bitcoin exchange-traded product (ETP) in February, targeting professional European investors. It has lost about 55% since its inception.

Just over a year ago, cryptocurrency mania was at its peak, with the price of Bitcoin exceeding $67,000. In January, Bridgewater Associates estimated that 5% of Bitcoin was held by institutional-grade investors.

Back then, bubble predictions were everywhere. JPMorgan Chase & Co. strategist Nikolaos Panigirtzoglou wrote that, in theory, bitcoin would crowd out the gold market, with a long-term price of $146,000 possible. A PwC survey in April found that 42% of crypto hedge funds expect bitcoin to trade between $75,000 and $100,000 by the end of 2022.

Today, investor sentiment is more restrained. In a note this week, Panigirtzoglou said bitcoin could revisit the summer low of $13,000. Bitcoin traded below $17,000 on Friday.

“The idea of ​​investing in cryptocurrencies as a diversification investment died out a while ago,” he said in an interview.

Bitcoin has crashed and rallied before. Some believers believe that the market's arrogance is being watered down, which will eventually allow the industry to mature. Morgan Stanley analyst Mike Cyprys wrote that FTX's troubles could actually benefit stocks such as the Nasdaq Stock Market and CBOE Global Markets Inc. An established company with a track record of risk management.