Crypto's comeback: Should Bitcoin and other digital assets be in your portfolio now?
SINGAPORE - Cryptocurrencies like Bitcoin and Ether have rallied in recent weeks, buoyed by clearer regulations in the United States and renewed investor interest, prompting the question of whether digital assets now have a place in mainstream investment portfolios.
Bitcoin, the world's largest cryptocurrency, was trading at more than US$119,000 on July 28, after briefly crossing the US$120,000 mark for the first time on July 14. It has risen more than 80 per cent in the past 12 months, driven by new bitcoin exchange-traded funds (ETF) and rising institutional adoption, among others.
Ether was changing hands around US$3,800, up more than 60 per cent in the past month following inflows into newly launched US-listed spot Ether ETF. It is up nearly 20 per cent over the past year.
The price surge coincides with the passing of the Genius Act in the United States, which sets out clearer rules for US dollar-pegged cryptocurrencies known as stablecoins.
While the new law does not apply to other digital assets such as Bitcoin and Ether, it is still seen as a win for the sector, with supporters welcoming it as a step towards legitimising an industry long associated with speculation and regulatory ambiguity.
Crypto's rebound has raised questions over the role of digital assets in investor portfolios.
While clearer regulations in the US and renewed interest have fuelled gains, analysts here are divided on whether the rebound signals a sustained recovery for crypto.
Still a risky asset
Mr Timothy Liew, head of investments at OCBC Bank, said the regulatory developments in the US are a welcome step and will be viewed positively by investors and market watchers. However, he cautioned that it is still 'early days' and that volatility in the cryptocurrency market is likely to persist.
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'While the Genius Act may provide greater legitimacy to crypto-linked companies, it still remains to be seen if the law can usher in long-term systematic shifts that will pave the way for everyday digital asset payments,' he said.
'Cryptocurrencies can have significant price volatility as their value does not typically relate to any economic fundamentals, so investors must exercise caution when deciding to invest in it.'
Mr Liew noted that institutional investors are likely to gravitate towards more established cryptocurrencies such as Bitcoin and Ether, while retail investors and those with higher risk appetites may favour smaller, lesser-known tokens - known as altcoins - which tend to be more volatile but offer the potential for bigger returns.
'While investors with bigger appetites can still consider such assets, they need to understand these risks by diversifying their portfolio and limiting exposure to cryptocurrencies… They also need to be prepared to suffer significant or total capital losses in a worst-case scenario,' he said.
Mr Saad Ahmed, head of Asia-Pacific for cryptocurrency exchange Gemini, said that the Genius Act does not introduce a comprehensive regulatory framework for all cryptocurrencies, but it's a 'meaningful signal' that US lawmakers are starting to take digital assets seriously.
'Combined with growing institutional participation and continued momentum around Bitcoin ETFs, the legislation has helped boost investor confidence across the board,' he said.
'However, it's important to note that this is not a full regulatory framework for crypto, and broader clarity may come through the market structure bill, which is still pending and expected to address more comprehensive oversight of digital asset markets in the US on the institutional and retail side.'
Mr Ahmed was referring to the Clarity Act, a second piece of legislation which is awaiting consideration in the US Senate. This aims to set clear rules on whether a digital asset is regulated as a security by the Securities Exchange Commission or as a commodity by the Commodity Futures Trading Commission.
He added that 'while Bitcoin and other digital assets are increasingly seen as credible parts of a diversified portfolio, whether to include them depends on each investor's personal circumstances and time horizon.
'Investing in crypto, like any asset class, should be guided by individual research, risk tolerance and financial goals.'
Becoming more mainstream
Still, things are looking up for the emerging asset class.
DBS Group Research FX and credit strategist Chang Wei Liang struck a more positive tone, noting that clearer rules under the Genius Act could encourage stablecoin adoption by financial institutions, corporates and even households.
This, in turn, may boost demand for cryptocurrencies used in stablecoin transactions and pave the way for broader use of crypto-based payment methods
While cryptocurrencies could face heightened volatility given their sensitivity to broader market movements, the investor base for digital assets has been growing beyond retail participants to include institutions like corporate treasuries, pension funds, and even US state funds, Mr Chang said.
This trend is driven by improved access via ETFs, increasing recognition of cryptocurrencies as potential reserve assets, and greater interest in developing blockchain-based payment systems, such as those using stablecoins.
'The net impact is that cryptocurrency prices could continue to rise even after Trump's term, helped by the ongoing structural rise in crypto usage, and this may sustain investor interest despite uncertainty over tariffs,' he added.
Mr Darius Sit, founder of digital asset trading firm QCP Capital, noted that much of the recent purchase of digital assets has so far come from institutional investors.
He said cryptocurrencies are evolving from speculative instruments to investment-grade assets that now command serious consideration from such investors.
'The approval of US spot Bitcoin ETFs led by BlackRock was a watershed moment for the space…. It opened the door for some of the world's largest countries and companies to access Bitcoin through a structure they already understand and trust,' he said.
Bitcoin and Ethereum are also larger coins by market capitalisation, and hence more mature with declining volatility, and this a strong indicator of market maturity and increasing institutional adoption, he added.
'Bitcoin is finite and programmatically scarce by design.... Given its fixed supply of 21 million and rising institutional adoption, its price is likely to trend higher from here,' he said.
Rising investor interest
As a result, both institutional and retail interest in cryptocurrencies has picked up globally.
In the US, banking giant JPMorgan is preparing to offer loans backed by clients' cryptocurrency holdings, such as Bitcoin and Ethereum. The bank already allows clients to borrow against crypto ETFs, such as BlackRock's iShares Bitcoin Trust.
On July 18, Hong Kong-based virtual asset manager Pando Finance launched its Bitcoin ETF on the Hong Kong Stock Exchange, expanding access to the cryptocurrency to retail investors.
Still, investors here should be aware of Singapore's more cautious stance on crypto.
The Monetary Authority of Singapore (MAS) has repeatedly warned of the risks of crypto-trading and prioritised consumer protection in its regulatory approach.
For example, licensed crypto firms, classified as digital payment token service providers under the law, are prohibited from offering incentives to attract retail customers.
Retail investors are also not allowed to use credit, leverage, or derivatives linked to cryptocurrencies.
From June 30, digital token service providers offering services exclusively to overseas customers - whether involving digital payment tokens or capital market products - must be licensed by MAS or cease operations,' MAS said in June.
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