U.S.-based investment management firm Morningstar is educating its investors on Bitcoin and other cryptocurrencies.
In a Q&A post for investors, Morningstar states that the initiative is part of its role in empowering investors after the digital space experienced recent growth.
However, the firm acknowledges that it has no long-term stand on cryptocurrency investment despite offering resources to investors.
“We continue to monitor investor interest in the digital asset space and are evaluating how investors might successfully employ cryptocurrencies in their portfolios. As examples, we currently carry over 120 crypto/digital asset exchange feeds in our exchange data platform,” said Morningstar.
As part of enlightening investors on digital assets, Morningstar has categorized the industry into four segments; cryptocurrencies, cryptocurrency storage and payments, digital securities and services, network and crypto exchanges.
Bitcoin initiated the recent cryptocurrency rally with the asset hitting a new all-time high of $59,800 by press time. The increasing entry of institutional investors such as Tesla (NASDAQ: TSLA) played a key role in the surge.
Bitcoin’s role in investment portfolio
Recently, Morningstar published an article on the pros and cons of including Bitcoin in an investment portfolio. Interestingly, the firm remains skeptical about considering Bitcoin as an investment asset.
The U.S.-based investment research firm notes that with the increased entry of institutional investors into the Bitcoin space, the asset is steadily losing its value as a diversification tool. Therefore, the firm warns that there is no guarantee Bitcoin can improve a portfolio’s risk-adjusted returns.
However, Morningstar concludes that Bitcoin is better off as an alternative currency and a commodity that can support new technologies.
“For that reason, bitcoin is probably best used in (very) small doses as a hedge against weakness in the dollar and major disruptions in the global financial system.”
Morningstar adds that Bitcoin proponents should also watch out for other emerging alternatives. The platform singles out, Ethereum, Litecoin, Cardano, Bitcoin Cash, and Lumens as formidable Bitcoin substitutes.
The firm also points out that Bitcoin also has shortcomings as it does not generate cash flows. Its value primarily depends on what people are willing to pay.
Morningstar currently has operations in 27 countries, having covered about 621,370 investments with a workforce of 5,230.