“Until bitcoins are more established, or even regulated, we don't anticipate any significant exposure in our holdings to them or other digital currency,” said Charles Wollmann, director of communications for the $19 billion New Mexico State Investment Council, Santa Fe.
In a recent tweet, Nouriel Roubini, called bitcoin “a Ponzi game.” Mr. Roubini is co-founder and chairman of global macroeconomic strategy research firm Roubini Global Economics and a professor of economics at the New York University's Stern School of Business.
“Bitcoin isn't means of payment as few transactions in bitcoin. And given its volatility, all who accept it convert it right back into $/e/¥,” Mr. Roubini tweeted. “Bitcoin isn't a store of value, as little wealth is in bitcoin and no assets in it. Also, given price volatility, it is a lousy store of value. So bitcoin isn't a currency. It is btw a Ponzi game and a conduit for criminal/illegal activities. And it isn't safe given hacking of it.”
Some consultants say that digital currencies have significant roadblocks to overcome before they will be a mainstream investment.
“Bitcoin is not recognized as legal tender and many financial institutions are prohibited from dealing in this digital currency,” said Matt DenBleyker, director of research for Larry Thompson & Associates Inc., a Dallas-based investment consulting firm that serves endowments and foundations.
For that reason, most “institutionalized” hedge funds and other money managers that have significant institutional assets will shun exposure, he predicted.
Overall venture investment in bitcoin-related companies was about $74 million in 40 deals, according to venture capital research firm CB Insights, New York. The highest quarterly total of bitcoin deals was in the fourth quarter of 2013, when close to $50 million was invested in 18 deals. The largest bitcoin investment during the period was Andreessen Horowitz's $25 million investment in Coinbase in December. Coinbase is an international “digital wallet” that allows individuals to buy, use and accept bitcoins.
All the growth in venture capital bitcoin investment occurred in 2013, according to CB Insights data compiled by Matthew Wong, research analyst.
Hedge funds that have invested in bitcoins include Malta-based Exante's $30 million Bitcoin Fund and Dalsa Barbour Investment Fund managed by Dalsa Barbour, according to Preqin. There is no asset figure available for Dalsa Barbour Fund. The sole private equity fund with bitcoin exposure identified by Preqin is Liberty City Ventures' The Digital Currency Fund, which has a $15 million target.