Is your super invested in Bitcoin?

You’ve likely heard the buzz about Bitcoin, and maybe you’ve even invested in it yourself. But cryptocurrency in your super? How does that work? With its potential high returns and diversification benefits, we explain why AMP Super has invested in Bitcoin, and what this means for your retirement fund.

What is Bitcoin? 

Bitcoin is a decentralised digital currency that operates on a technology called Blockchain. This means it’s not controlled by any central authority like a bank or government, and transactions are verified and recorded on a public ledger, ensuring transparency and security. 

Why has AMP invested in Bitcoin? 

The short answer – because the modelling results look promising.

AMP includes an investment process known as Dynamic Asset Allocation (DAA) in many of its funds. DAA uses mathematical models to predict when market prices are likely to move higher or lower, and places trades accordingly. 

DAA is diversified over asset classes, markets, timeframes and insights (the underlying rationale for why the trading model should be profitable) and is implemented in a risk-controlled way.

The US Securities and Exchange Commission approved US-listed exchange traded funds in January 2024, ensuring investor protections, which in our view legitimised Bitcoin as an investible asset class. Because of this, AMP’s portfolio management team began research on trading models for Bitcoin, adapted from the models they use for other asset classes, which produced very good results. 

What are the benefits for members?

Investors may receive higher and smoother returns as a result of our DAA, of which our Bitcoin models are a component. 

Does AMP Super hold Bitcoin or Bitcoin futures – and what does this mean? 

AMP Super holds Bitcoin futures.  

A futures contract is an agreement to buy or sell something (like oil, gold, or even financial instruments) at a set price on a future date. 

Imagine you and a car dealer agree today that in three months you'll buy a specific car for $20,000, regardless of what the market price is at that time. This agreement is like a futures contract.  

It's a way for people to lock in prices and manage risks related to price changes.  Futures are derivatives that are tied to the price of some investible asset, making it much cheaper and easier to hedge or take on price exposure of certain investments.

Bitcoin, like oil or gold, is hard to trade. We’d need to create a crypto wallet and store the secret keywords securely or employ a specialist custodian for this one purpose in our portfolio, and so it’s easier to implement using futures, which we already do for many other activities in our portfolio. 

What investment profiles include Bitcoin in their investments?

AMP Super’s options that include Bitcoin futures are the MySuper and Future Directions options. You can login to My AMP to see what investment options your super is currently invested in. 

Like many other investments, losses may occur, the repayment of capital and rates of return for this investment are not certain or guaranteed, and past performance is not an indication or guarantee of future performance.

What percentage of these profiles are Bitcoin investments? 

It varies based on what our DAA models are saying, but it’s generally a small fraction of a percent. The riskiness (known as the volatility) of Bitcoin is much higher than shares or bonds, which is why it has a smaller position size.

This applies to all trading positions in our DAA, which is diversified over many positions at any time. The percentage of the portfolio will reflect a combination of the strength of the trading signal and the riskiness of the asset being traded. 

Can I choose to invest a specific percentage allocation of Bitcoin into my super?

Not at this time, but keep an eye on communications from AMP for any updates. 

What is the risk profile of having my super invested in Bitcoin and how are you managing it?

The residual risk is very low. The exposure is small, and our DAA models are designed to quickly de-risk in falling markets. 

How has the investment performed so far?

The Bitcoin price has risen strongly since we first added Bitcoin futures into the portfolio and has made a positive contribution to fund returns. The contribution is modest given the relatively small holding as a proportion of the overall assets (approximately 0.05%). 

I've heard Bitcoin uses a lot of energy, how is AMP addressing that/what is AMP’s position on that?

It’s true that Bitcoin ‘mining’ uses a lot of energy, estimated at 0.1-0.2% of global energy consumption*. This energy consumption is what makes the Bitcoin network secure: the cost to mine a block is high (currently around $270,000 USD on average) and the network is secured by billions of dollars of specialised mining equipment distributed all over the world. The energy consumption currently translates into over 800 exahashes per second, making Bitcoin by far the most secure decentralised computer network in the world. 

However, it’s not widely known that the majority of energy used in Bitcoin mining comes from sustainable sources, such as stranded hydroelectric power and surplus renewable energy**. Bitcoin mining is also aiding the green energy transition by partnering to build renewable energy facilities that would otherwise be commercially unviable.***

For more information on AMP Super investments, visit our website. AMP Super members can schedule an appointment with a Simple Advice financial adviser for personal advice on their investment options, with no extra fees. 

*Source: Cambridge Bitcoin Electricity Consumption Index

**Source: CCN.com: Bitcoin’s Massive Energy Consumption Hides Opportunities for Sustainable Solutions

***Source: Cointelegraph.com: Bitcoin Mining Boosts the Transition to Renewable Energy