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Investors in bitcoin face a "realistic risk of total loss" and everyone but the most speculative should steer clear of cryptocurrencies, a senior staff member at the asset management arm of Deutsche Bank has warned.
"We do not recommend that. It’s only for investors who invest speculatively," Markus Mueller, Global Head of the Chief Investment Office at Deutsche Asset Management said in an interview with Bloomberg.
"There is a realistic risk of total loss."
Mueller went on to say that for bitcoin to considered a real, tradeable asset that Deutsche AM may include in its portfolio, huge strides are needed on "regulation, security and transparency," in the crypto world.
"Important issues such as liability and documentation are unclear," he said. "We are still at the very beginning."
"When security and trust are created, crypto-currencies can be assessed like established asset classes. It is possible that the governance required will exist in five to ten years from now," Mueller added.
Mainstream investors and institutions remain split on cryptocurrencies. Most see at least some scope for the blockchain technology underlying bitcoin to have real world applications, but many institutions see bitcoin itself (as well as other cryptocurrencies) as worthless exercises in speculation, not worth the distributed ledger they’re printed on.
Late in 2017, for example, Paul Donovan, the global chief economist at UBS’s wealth management arm, tore into the argument that cryptocurrencies could eventually replace fiat currencies like the pound and the dollar.
"The problem that cryptocurrencies face is that they fail the two key metrics of what makes a currency a currency," Donovan said. "A currency has to be a widely used medium of exchange. Cryptocurrencies are never going to achieve that. Period."
Mueller’s assertion that Deutsche AM will steer of the crypto space for the foreseeable future comes after analysts at boutique research house Bernstein said similar.
"Cryptocurrencies and underlying blockchains seem set to grow and become a disruptive force. Thus they will have significant implications for investors. But, for now at least, they do not have a direct role in asset allocation," a note from a Bernstein team led by Inigo Fraser-Jenkins circulated last week said.
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