As bitcoin prices surge to new record highs while inflows into the new bitcoin ETF (which holds exactly zero actual bitcoin) are going absolutely gangbusters, more institutional players are revealing plans to get involved in crypto trading.
Speaking to a CNBC reporter Wednesday during the TV Channel's "Seeking Alpha" conference, PIMCO CIO Daniel Ivascyn announced that his firm, which has already "dabbled" in crypto, plans to gradually invest more in the nascent asset class, starting with its quant-based and "trend-following" strategies, before moving on to more long-term strategies.
"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 in an interview with CNBC’s Leslie Picker for Delivering Alpha.
"So this will be a gradual process where we spent 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."
Those who have been trading crypto for a while know that the promise of "institutional" involvement in the crypto asset class as it gains more legitimacy in the eyes of regulators (and the industry, and just, like, regular people) has always been quoted by bulls as one of the best reasons to be - and stay - long in bitcoin.
So far, though, it looks like PIMCO's hedge funds have mostly been dabbling in bitcoin futures, and perhaps even the new ETF, not the cryptocurrency itself. And while they're not taking on "directional exposure" - ie solid longs - the firm has apparently been engaged in a fair bit of bitcoin swing trading.
Ivascyn said some of Pimco’s hedge fund portfolios are already trading crypto-linked securities.
"We’re trading from a relative value perspective. 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," Ivascyn said.
"So that was a starting point for us in a very narrow segment of our business."
And beyond just bitcoin and the other largest cryptocurrencies, PIMCO is looking more closely at the decentralized finance - or "DeFi" - industry more generally.
"You have to understand decentralized finance, because it will be disruptive, and it very well may disrupt our industry, in our business in particular," Ivascyn said.
The firm is "thinking about scenarios where this could take us to ensure that we are competitively prepared to deal with what’s a rapidly changing environment that offers a pretty significant value proposition, particularly for younger generations, or the new generation of the investment community."
PIMCO is hardly alone in this. Large financial firms, including PayPal, Fidelity and others, have long since embraced bitcoin and crypto while some companies, like Square and - famously, the original "bitcoin ETF" - MicroStrategy, have used their own balance sheets to buy bitcoin. Morgan Stanley was first among banks to offer bitcoin funds to its clients, and Goldman Sachs quickly followed with an announcement of its own.