Market participants criticized a pension scheme’s Bitcoin investment, calling it “speculative” and “irresponsible”
UK wealth and investment experts have criticized the legitimacy and safety of digital assets like Bitcoin, arguing that consumers and businesses should be wary of “dramatic price falls.”
“While the price of Bitcoin is currently riding high, in the past we’ve seen strong performance quickly giving way to dramatic price falls,” said Laith Khalaf, head of investment analysis at AJ Bell.
“That in itself is a big hindrance to Bitcoin being adopted by consumers and businesses as a means of exchange.”
Khalaf’s comments come amid a wave of industry criticism after it emerged earlier this week that an unnamed UK pension scheme invested 3% of its assets in Bitcoin.
The defined-benefit scheme, which became the first of its kind to take the plunge into the crypto markets, has come under fire from various market participants for “gambling with retirees’ futures”.
“This is a very strange decision. Pension funds should surely be investing for the long term rather than speculating over the short-term,” Colin Low, managing director at Kingsfleet, told Newspage.
Similarly, Daniel Wiltshire, actuary at Wiltshire Wealth, called the move “deeply irresponsible”, branding cryptocurrency a “basketcase asset”.
“This is deeply irresponsible. Pension trustees have an obligation to ensure scheme assets are managed prudently,” he said.
“This precludes taking punts on a basketcase asset class like crypto. For the sake of the members, I hope the regulator is paying attention.”
Cartwright, a pension advisory firm involved in the fund’s decision, defended the Bitcoin allocation as a “strategic move” aimed at diversifying the portfolio. The firm argued that Bitcoin’s “unique asymmetric risk-return profile” offered the potential for significant upside while mitigating downside risks.
While Cartwright positioned the investment as forward-thinking, its inherent volatility triggered alarm among financial experts. Just two years ago, the cryptocurrency fell below $17,000 after the collapse of the crypto exchange FTX, but it has since soared to record highs of over $99,000.
Trustees overseeing pension schemes traditionally prioritize stability and long-term growth, making Bitcoin’s extreme price swings a contentious choice.
Divided opinions on Bitcoin in pension portfolios
While many experts have criticized the pension fund’s decision, some argue it reflects growing recognition of Bitcoin’s potential, particularly in light of the staunchly pro-crypto views of incoming U.S president Donald Trump.
Chris Barry, a director at Thomas Legal, described a Bitcoin allocation below 5% as “sensible”. While there’s currently no precedent for pension funds buying crypto in the UK, U.S. funds have been doing it for a while.
UK pension funds lag behind their US counterparts in embracing crypto.
“Bitcoin is the top-performing asset class over the past 10 years on average, even beating the NASDAQ,” Barry said.
“The direction of travel following Trump winning the US election is very bullish indeed.”
David Belle, founder and trader at Fink Money, offered a similar perspective, suggesting that Bitcoin’s inclusion is consistent with broader portfolio strategies.
“A portfolio is just numbers made up of different betas, assets which either outperform or underperform a benchmark,” Belle said. “Crypto is a fine asset class if it fits risk appetite.”
