- Japan’s Government Pension Investment Fund (GPIF) will consider Bitcoin an investment asset.
- GPIF is the world’s largest pension fund by assets under management.
- Pension funds already invest in Bitcoin.
Bitcoin’s arduous journey to gain legitimacy as an investment asset in the eyes of TradFi has been an uphill battle. Dismissed by skeptics as a speculative craze, the cryptocurrency has fought hard to shed its reputational baggage.
Yet Bitcoin’s bid for bona fide status took a massive step forward in January when the US Securities and Exchange Commission greenlit all applications for spot Bitcoin exchange-traded funds. In a further twist, Japan’s Government Pension Investment Fund (GPIF) announced it has begun exploring the leading cryptocurrency as a potential investment asset.
GPIF Opens Exploration into Bitcoin, Others
In a massive boost to Bitcoin’s legitimacy, the GPIF announced it is soliciting information on potentially diversifying its investment operations into “illiquid assets” like Bitcoin, gold, forests, and farmland. The fund has traditionally invested in more conventional vehicles such as domestic and foreign stocks, bonds, infrastructure, and real estate.
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With $1.5 trillion in assets under management, the GPIF ranks as the world’s largest pension fund. Despite its traditional investment approach, the fund has increasingly sought to diversify its portfolio recently, with Bitcoin highlighted as a potential way to achieve diversification.
The GPIF has stressed that its interest in Bitcoin is merely informational at this stage, and no decision has been made on whether to buy BTC. Nonetheless, the GPIF’s exploration of Bitcoin as a potential investment asset underscores its growing legitimacy within mainstream finance.
The Case For Pension Funds Adding BTC
The debate rages on whether Bitcoin is an appropriate pension fund investment asset. However, Anthony Pompliano recently gave his take on the matter, arguing that Bitcoin’s non-correlation makes investing in it a way to “reduce the risk and increase the returns of a portfolio according to modern portfolio theory.”
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Pompliano also highlighted Bitcoin’s “asymmetric return profile” as a draw for pension funds. “There is much more upside than downside in owning the asset,” Pompliano stated, with the downside loss capped at the invested capital but a potential upside of x100 should Bitcoin match gold’s market cap.
While the GPIF weighs its options, some smaller US public pension funds have already taken the crypto plunge. In 2019, the Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System allocated a portion of their portfolios to Bitcoin. Additionally, US BTC ETFs offer a potential way for pension funds to get Bitcoin exposure.
On the Flipside
- Japan’s central bank raised interest rates for the first time in 17 years, marking a change in policy to end negative interest rates.
- The implications of a positive interest rate are far-reaching, including more attractive Japanese bonds and the potential for global liquidity to flood Japan at the expense of other jurisdictions.
- Critics argue that crypto volatility makes Bitcoin unsuitable for pension fund investing.
Why This Matters
An investor of the GPIF’s stature contemplating Bitcoin underscores how rapidly the narrative around cryptocurrency is shifting within the TradFi world. If the GPIF decides to proceed, it would pave the way for other large institutional investors to follow suit.
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