Bond giant Pimco says it’s ready to embrace crypto, which it sees as a potential store of value and inflation hedge

Bitcoin green balloon
Bitcoin green balloon D-Keine
  • Pimco has dipped its toe in trading crypto, CIO Daniel Ivascyn told CNBC Thursday.
  • The cryptocurrency market is now worth over $US2.6 ($AU3) trillion, after bitcoin hit record highs this week.
  • Ivascyn said crypto was a potential store of value that could be used as an inflation hedge.
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Bond giant Pimco plans to gradually edge into trading in cryptocurrencies, its investment chief Daniel Ivascyn told CNBC.

He mapped out the incremental moves the world’s largest-fixed income firm will take to deepen its investment in digital assets, speaking in a “Delivering Alpha” interview Wednesday.

“Now we’re looking at potentially trading certain cryptocurrencies, as part of our trend-following strategies or quant-oriented strategies, then doing more work on the fundamental side,” Ivascyn said.

“So this will be a gradual process, where we spend a lot of time on the internal diligence side speaking to investors, and we’ll take baby steps in an area that’s rapidly growing.”

The cryptocurrency market is now worth more than $US2.6 ($AU3) trillion, according to CoinMarketCap data, after bitcoin hit a record high close to $US67,000 ($AU89,143) Wednesday. Its price soared after the launch of the US’s first bitcoin-linked exchange-traded fund which was seen as a watershed moment for the industry.

Pimco has already dipped its toe into digital assets via investments in crypto-linked securities, its CIO noted.

“We’re trading from a relative-value perspective,” Ivascyn said. “So we’re not taking directional exposure, but we’re looking to take advantage of mispricings between the cash product, popular trust that trades on the exchange, and then the futures.”

“That was a starting point for us in a very narrow segment of our business.”

One factor for Pimco is that it believes bitcoin can work as a store of value and as an inflation hedge. The firm’s clients are turning to crypto, as US inflation growth looks set to dent confidence in other assets, according to Ivascyn.

While bitcoin can in theory be that type of hedge, it does come with risks, he acknowledged.

“But there’s obviously a tremendous amount of volatility, and you’re taking on a lot of additional risk with crypto and bitcoin in particular. These are rapidly growing and changing markets.”

Regulators’ response to those evolving markets is something Pimco has to be “very careful” about, Ivascyn said, highlighting the crypto crackdown in China and concerns expressed by the SEC.