[betterunix2]

Pension funds will not even consider Bitcoin until it becomes much more stable. Pensions are an obligation and therefore demand much lower risk -- if a 5% change in value in a single day is not considered newsworthy there is no way pensions will make that investment.

What makes you think the end cannot come before pensions and mutual funds start investing? What if panic selling triggers a deep loss in value, which then triggers miners to shut down as the mining reward falls below the energy cost; if enough miners shut down, someone could pull off a double-spending attack, and when people see that it will further reduce their confidence in the system. The result could be that confidence in Bitcoin never recovers.

Or Bitcoin could just be a fad that slows unwinds and fades away, and twenty years from now we'll all be laughing about it over drinks. I can think of a few other technologies that were "definitely going to take over" and are barely remembered today...

[abecedarius]

I don't understand quantitative finance, but I had the impression portfolio theory can find a place for any amount of volatility. If the volatility is very great or it's correlated with the rest of your portfolio, then your appetite may be small, but high returns may make it still worth buying some. Is that wrong? I also have the impression that bitcoin's volatility has been relatively uncorrelated with other asset classes, so that'd be a plus. (Maybe I'm wrong about that too.)

[natalyarostova]

No, you're right. For portfolios It's all about the covariance matrix. Having said that, there is probably still the more banal reality of pensions or institutional funds actually needing a portfolio manager to go out and buy bitcoin, which probably would be a publicitly/legal nightmare if done poorly, or if the first person to do it gets burned.

[xbzbanna]

On the other hand, if one pension starts a trend, there might be big benefits to being first in. How do does one fit such outcomes into the volatility calculation...

[wpietri]

Why would a pension fund get into this? They look for assets that over the long term will create significant economic value. E.g., VCs who fund startups. But buying Bitcoin and holding it is like holding gold: the asset isn't doing anything useful while you're holding it, so you're really just making a bet about future scarcity.

If a pension fund were bullish on Bitcoin, I think they'd be much better of going long a VC fund that is investing in the space.