Christian Armbruester wishes he’d bought more.
Armbruester, the founder of Blu Family Office, a London-based investment firm for wealthy clients, dabbled in cryptocurrencies a few years ago. But the onetime investment banker, whose family made a fortune in metals and manufacturing, believes cryptocurrencies have earned a place in a diversified portfolio. With Bitcoin surging more than 270% since its 12-month low in March, he’s ratcheting up his investments in the space and eyeing big gains.
“We’re now looking for trading opportunities in a very exciting field,” said Armbruester, who manages about $670 million for Blu Family Office, including his personal wealth.
Armbruester has plenty of company. Mexican media billionaire Ricardo Salinas Pliego recently tweeted that he’s invested 10% of his liquid assets in Bitcoin. Wall Street legends Stanley Druckenmiller, Paul Tudor Jones, and Bill Miller have endorsed buying it. After influential money manager Rick Rieder went on CNBC last month and said Bitcoin “is here to stay,” more than 874,000 viewers watched the clip on Twitter, attracting far more hits than his segments on Covid-19 or monetary policy.
“It tells us that Bitcoin has caught the attention and imagination of many people,” Larry Fink, chief executive officer of asset-management giant BlackRock Inc. and Rieder’s boss, during a virtual conference on Dec. 1. “But it’s still untested and a pretty small market relative to other markets.”
The last time Bitcoin skyrocketed in 2017, many wealthy investors largely stayed on the sidelines. The ersatz money was compared to the tulip mania during the Dutch Golden Age, and its utility as a money-laundering device in the digital underworld scared off many in mainstream finance. Warren Buffett called Bitcoin a “mirage” and Jamie Dimon said it was a “fraud” (although he later expressed regret for that remark).
Since then, Bitcoin has yet to prove it will truly become a form of universal money accepted around the world. And many affluent investors such as Armbruester believe alternatives such as Ethereum may ultimately prove more valuable. Moreover, cryptocurrencies are traded in an opaque market driven by rampant speculation and arcane technology rather than the easy-to-see fundamentals that drive stocks or bonds or commodities. And this week investors are getting a lesson in Bitcoin’s volatility, with the cryptocurrency skidding about 8.5% since Sunday.
Even so, affluent investors are giving Bitcoin a serious second look as it wins mainstream acceptance by influential players such as PayPal Holdings Inc. and Visa Inc., both of which are enabling account holders to use crypto. Miller is one of many traditional investors who’s noted that the stability of Bitcoin and its 12-year-old technology, blockchain, is bolstering confidence in its staying power.
Meantime, other investors are opting to back the new generation of database and financial software inspired by Bitcoin. “We have allocated to Blockchain and distributed-ledger technology-focused funds and companies recently, and we will continue to allocate more,” said Bobby Console-Verma, the founder of London-based technology firm, 1fs Wealth, who also manages money for his investment office.
Then there’s the moves by central banks and governments to flood economies with cash and drop interest rates to near zero to address the coronavirus pandemic. This massive wave of quantitative easing and fiscal stimulus, which shows signs of continuing next year, is also burnishing cryptocurrencies’ credibility as an alternative asset class.