$2.2 Trillion Bond Giant Embraces Crypto as ‘Inflation Hedge and Store of Value’

October 23, 2021, 10:00 AM AEST - 1 month ago

Pimco, a US$2.2 trillion global fixed-income giant, will continue to explore crypto assets that have the “potential to disrupt the financial industry”, according to a report from CNBC.

Exploring Cryptocurrencies as an Inflation Hedge

During an interview with CNBC, chief investment officer Daniel Ivascyn revealed that Pimco had already invested in “crypto-linked securities” through several hedge fund portfolios, and plans to increment crypto assets exposure in the near future.

The move was announced on October 20 after Bitcoin and other high-market cap cryptocurrencies such as Ethereum surpassed record price levels, with BTC breaking above US$67,000 and ETH reclaiming the $4,000 mark, falling just short of its May ATH of $4,300.

Most cryptocurrencies saw a boost in price after the first Bitcoin futures-linked ETF, which saw a massive trading volume on its first days of approximately US$1 billion.

According to Ivascyn:

Now we’re looking at potentially trading certain cryptocurrencies as part of our trend-following strategies or quant-oriented strategies, then doing more work on the fundamental side. This will be a gradual process where we spend a lot of time on the internal diligence side speaking to investors. And we’ll take baby steps in an area that’s rapidly growing.

Daniel Ivascyn, CIO, Pimco

Ivascyn went on to say that cryptocurrencies like bitcoin offer an inflation hedge and a store of value against fiat hyperinflation and declining purchasing power. His comments resemble those of JPMorgan, whereby analysts at the investment bank revealed earlier this month that investors were replacing gold with bitcoin as a better inflation hedge.

Competitive Environment Keeps Pace with Innovation

Cryptocurrencies and the DeFi sector have become highly valuable financial instruments not only for crypto enthusiasts but for artists, content creators, institutional investors and more.

As crypto and blockchain technology advances continue to accelerate, traditional institutions are keener than ever to explore a space that’s innovating at such a pace. To that matter, Ivascyn said:

Pimco is thinking about scenarios where this could take us to ensure we are competitively prepared to deal with what’s a rapidly changing environment that offers a pretty significant value proposition.

Daniel Ivascyn, CIO, Pimco

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