Crypto Push Splits Bulls and Bears at $900 Billion Fund Manager

Cecile Gutscher, Bloomberg News

A Bitcoin sign on the opening day of the European Blockchain Convention at the Fira de Barcelona in October. Photographer: Angel Garcia/Bloomberg , Bloomberg

(Bloomberg) -- Since the creation of Bitcoin ushered in the cryptocurrency era almost 15 years ago, perhaps no other asset class has generated so much dispute about its inherent value. As major financial firms start rolling out digital-asset products for the masses, that debate is taking on new significance.

DWS Group, the $900 billion German asset manager which is preparing to introduce crypto exchange-traded funds, is a case in point.

“One camp of people in my group is saying forget it, the value of crypto is zero, there’s nothing behind it,” Bjoern Jesch, DWS’s global chief investment officer, said in an interview. “And there’s this other group of people saying like, hmm, I mean at least there’s a price of $35,000 for Bitcoin. Someone is paying $35,000.”

The divergent views among DWS fund managers highlight the delicate balancing act facing the giants of global finance as Bitcoin stages a sharp rebound, driven by optimism that US regulators are about to approve crypto ETFs. BlackRock Inc. and Fidelity Investments are among firms that have applied to launch such products.

Read more: Bitcoin ETF Momentum Spurs Biggest Monthly Gain Since January

In one corner are those who side with the likes of Berkshire Hathaway Inc.’s Charlie Munger, who in November last year called crypto “partly fraud and partly delusion.” They point to cryptocurrencies’ tendency to burn speculators in repeated bouts of extreme volatility, and their frequent use for money laundering and other crimes.

There’s also the industry’s penchant for self-inflicted wounds. Sam Bankman-Fried, up until a year ago considered by many the John Pierpont Morgan of crypto, is currently on trial on multiple counts of fraud that could lead to decades in prison. He has pleaded not guilty.

ETF Mania Unleashed

Standing against that, in part, is what crypto enthusiasts themselves would call FOMO, or fear of missing out. Even after the devastating “crypto winter” that started in late 2021, digital tokens have a total market cap of roughly $1.3 trillion. Bitcoin has more than doubled in value this year, handily outperforming stocks.

DWS signed a deal in April with crypto fund manager Galaxy Digital Holdings Ltd. to develop a suite of ETFs for the European market. The launch in coming months will build on the momentum generated by the wider crypto ETF mania, which has sent Bitcoin to the highest since May 2022.

In addition to developing crypto ETFs for retail buyers, the DWS Fintech Fund has an expanded mandate to buy crypto. DWS, majority owned by Deutsche Bank, oversees €859 billion ($908 billion) in assets.

Grayscale Investments LLC’s bid to convert its Bitcoin trust into an ETF notched a major win in August when a court overruled initial objections from the US Securities and Exchange Commission. Crypto investment products such as Bitcoin futures ETFs saw the largest single week of inflows last week since July 2022, according to asset manager CoinShares.

But for many skeptics, cryptocurrencies will remain on the speculative fringe even if ETFs make them easier to access.

“The most complex thing is to make a forecast on digital currencies,” Jesch said. “You do not have that much history. You don’t have collateral, you don’t have an economy, you don’t have a central bank. You could of course argue that tomorrow is zero maybe, or maybe it’s not, maybe it’s $40,000.”

--With assistance from Sujata Rao.