The Old Mutual Gold & Silver Fund has started investing in Bitcoin and putting the profits back into gold and silver assets as the value of the cryptocurrency rockets.
The UK-based asset manager, which has a portfolio of precious metals worth around $220m (£165m), has been allocating as much as 5% to cryptocurrencies since April. The fund balances investments in gold and silver bullion listed funds with gold and silver equities.
In March this year, the Bitcoin price exceeded the gold price for the first time, a trend that has continued ever since – the value of gold has risen around 8.7% over the past year, with an ounce now worth around £972. Meanwhile, the value of Bitcoin has gone up by around 1,000%, with one bitcoin now selling for around £7,430, a record high.
The Old Mutual Gold & Silver Fund manager Ned Naylor-Leyland said that Bitcoin was designed to be digital gold.
“If you’re going to have a small proportion of a fund in Bitcoin, it should be in a gold fund, because that’s exactly the point,” he said. “It’s about bringing the ownership of disciplined money into the modern world. Bitcoin is paving the way for the reintroduction of gold as global money.”
More mainstream
Chris Becker, an economic strategist at Investec Bank, believes Bitcoin could compete with gold as a global reserve or settlement asset.
“The more the value of Bitcoin goes up, the more seriously people are taking it,” he said. “Where gold is cumbersome to physically trade across the world, making large value payments in Bitcoin is almost as easy as sending an e-mail.”
The cryptocurrency saw a lift when the world’s biggest exchange operator, CME Group Inc, said that it would introduce futures contracts tied to Bitcoin by the end of this year, which would make it more mainstream by making it easier to trade. After the announcement in October, the value of Bitcoin went up by more than 50%.
However, it does have its critics, with many warning of a bubble that will inevitably burst.
Neil Wilson, senior market analyst at ETX Capital, said: “For traditionalists, it’s hard to fathom. Rather than a commodity or currency, Bitcoin is like owning stock in a company that will only ever issue 21m shares and never pay a penny in dividends.
“The only way it has value is if the next guy is willing to pay you more for it – the greater fool. With no intrinsic value to Bitcoin, it’s hard to see this as anything other than a giant speculative bubble.”
Safe as houses?
There has been a recent spate of properties being sold using Bitcoin this year, as more people are lured by the rising value of the cryptocurrency.
A property sale using Bitcoin can attract more buyers, as one seller in Notting Hill has found after receiving an unprecedented amount of interest for his mansion, which he is selling for Bitcoins.
Lev Loginov, co-founder of property investment company London Wall, which bought the property, said: “It can be done quicker, more efficiently and it is much easier to deal with than using banks, which are putting in unnecessary over-regulation.”
