Engaging with cryptocurrency markets doesn't necessarily mean purchasing digital assets directly, according to Taimur Hyat, the Chief Operating Officer at PGIM, in his recent conversation with Bloomberg.
Hyat, who manages operations at the $1.4 trillion asset management firm, suggests that investors should redirect their focus toward companies developing the foundational technology that drives the cryptocurrency ecosystem.
While acknowledging that speculative crypto traders might experience immediate gains, Hyat expressed skepticism about their ability to sustain profitability over extended periods. He further highlighted that cryptocurrencies tend to move in correlation with equities, offering limited diversification benefits for investment portfolios.
The PGIM executive elaborated:
There's a common misconception that believing in the crypto ecosystem requires direct investment in cryptocurrencies. We actually see significant value in some of the supporting infrastructure that's being developed around these currencies, where you don't need to expose yourself to the timing risks associated with the currencies themselves.
Hyat recommended investments in blockchain technologies, with particular emphasis on private, permissionless blockchain systems. He also expressed confidence that investments in smart contracts and companies leveraging this technology would yield substantial returns in the future.
Currently, exchange-traded funds (ETFs) tracking blockchain company stocks are experiencing significant underperformance. For instance, the Global X Blockchain ETF (BKCH) has declined by 66.11% since the beginning of the year. In contrast, Bitcoin (BTC), the leading cryptocurrency by market capitalization, has decreased by 34.93% year to date.
Beyond blockchain and smart contracts, Hyat identifies the metaverse as a sector with enormous potential. However, he cautions that metaverse investments are suitable only for investors with a long-term perspective, as allocating capital to this space currently would likely result in substantial short-term losses.
According to Hyat, the metaverse today resembles the pre-internet era. As time progresses, he anticipates the virtual world will produce numerous failures alongside a handful of successful platforms. While the ultimate winners remain uncertain, Hyat believes the space presents significant value creation opportunities.
Hyat's investment insights come as the metaverse continues gaining mainstream traction. As of March 2022, awareness of the metaverse had more than doubled, according to data from Wunderman Thompson Intelligence. Despite surveyed consumers expressing concerns about privacy and children's safety, they acknowledged that the metaverse represents the future of digital interaction.
