Cryptocurrencies are “basket assets” with “no intrinsic value,” asset experts claim.

Market participants have criticized the pension scheme’s Bitcoin investment as “speculative” and “irresponsible.”

British wealth and investment experts have criticized the legality and safety of digital assets such as Bitcoin, arguing that consumers and businesses should be wary of “sharp price falls”.

“While the price of Bitcoin is currently seeing strong gains, in the past we have seen strong performances quickly turn into sharp price declines,” said Laith Khalaf, head of investment analysis at AJ Bell.

“That in itself is a major impediment to the adoption of Bitcoin as a medium of exchange by consumers and businesses.”

Khalaf’s comments come amid growing criticism from the industry after it emerged earlier this week that an unnamed British pension scheme had invested 3% of its assets in Bitcoin.

The defined benefit system, which was the first to enter the cryptocurrency market, is being criticized by various market participants for “gambling with the future of retirees.”

“This is a very strange decision. Pension funds need to invest for the long term rather than speculating in the short term,” Colin Low, managing director at Kingsfleet, told Newspage.

Likewise, Daniel Wiltshire, an actuary at Wiltshire Wealth, called the move “highly irresponsible” while branding cryptocurrencies a “basket asset”.

“This is truly irresponsible. Pension trustees have a duty to manage scheme assets carefully,” he said.

“This rules out investing in basket asset classes such as cryptocurrencies. “For the sake of our members, we hope that the regulatory authorities will pay attention.”

Pension advisory firm Cartwright, which was involved in the fund’s decision, defended the Bitcoin allocation as a “strategic move” aimed at diversifying the portfolio. The company argued that Bitcoin’s “uniquely asymmetric risk-return profile” offers significant upside potential while mitigating downside risks.

While Cartwright considers the investment forward-thinking, the volatility inherent in the investment has raised alarm among financial experts. Just two years ago, after the collapse of cryptocurrency exchange FTX, the price of the cryptocurrency fell below $17,000, but has since surged above $99,000 to an all-time high.

Trustees overseeing pension schemes traditionally prioritize stability and long-term growth, making Bitcoin’s extreme price fluctuations a controversial choice.

Opinions are divided on Bitcoin in pension portfolios

While many experts have criticized the pension fund’s decision, some argue it reflects growing awareness of Bitcoin’s potential, especially in light of incoming US President Donald Trump’s staunchly cryptocurrency-friendly views.

Chris Barry, director at Thomas Legal, described a Bitcoin allocation of less than 5% as “reasonable”. There is currently no precedent in the UK for a pension fund to purchase cryptocurrencies, but US funds have been doing this for some time.

UK pension funds are lagging behind their US counterparts in embracing cryptocurrencies.

“Bitcoin has been the best-performing asset class over the past decade, outperforming the NASDAQ on average,” Barry said.

“The direction of travel after Trump wins the US presidential election is very optimistic indeed.”

David Belle, founder and trader at Fink Money, offered a similar perspective, suggesting that the inclusion of Bitcoin is consistent with a broader portfolio strategy.

“A portfolio is just a number made up of different betas, assets that are either outperforming or underperforming their benchmark,” Belle said. “Cryptocurrencies are a great asset class if it suits your risk appetite.”