Why More And More Single-Family Offices Are Investing In Bitcoin

Bitcoin is a digital currency. Unlike traditional currencies, bitcoins are “mined” by individuals and companies running sophisticated computers solving mathematical problems. Bitcoins have a number of defining characteristics including:

• It is decentralized meaning there are not any institutions controlling the currency.
• It is transparent because of blockchain technology.
• It is fast way to transfer funds and the transaction fees are diminutive.

While bitcoins are used as currency to purchase services and products, they are also a potential asset class. According to Angelo Robles, founder and CEO of the Family Office Association, “We’re seeing a growing number of single-family offices – especially those with greater assets – invest in less traditional assets such as bitcoin. There are a number of overlapping rationales for these single-family offices to invest in bitcoins. For example, there’s a fixed supply of bitcoins, more businesses are accepting the currency, and more and more investors from hedge funds to institutional players are looking at bitcoins as a way to diversify a portfolio. Also, bitcoin benefits by being first on the scene and establishing a beachhead of sorts.”

“Investments in Bitcoin and its related assets – which are uncorrelated to other assets in the traditional family portfolio – can provide diversification, but investors need to understand the risks,” says David Berger, Chairman of the Digital Currency Council. “Bitcoin will have a binary outcome – it’ll either be a grand slam or it’ll crash – and there will be lots of volatility along the way. I don’t view Bitcoin as suitable for a family seeking wealth preservation, but see it more similarly to a high risk high reward venture investment and as a way to diversify a portfolio.”

“While a growing number of single-family offices are investing in bitcoins and other decentralized digital currencies, some are choosing to invest in companies that are building the technology and infrastructure,” says Berger. “The ecosystem developing around this new asset class is growing very quickly.”