In Q1 2025, Norway’s $1.7-trillion state wealth fund Norges Bank lost $40 billion. US tech stocks drove this decline. There’s more to it. Through its investments in Coinbase and Riot Platforms, the fund’s Bitcoin ties have been questioned. Bitcoin is volatile, but might it help Norges Bank weather a global trade war and a slowdown? Investigate what caused this.
The Tech Stock Slump and Its Impact
US tech stock declines caused Norges Bank’s greatest loss. The fund invests heavily in North American tech stocks. The fund tracks the FTSE Global All Cap Index to spread risk, but tech stocks fell, showing its weakness. Tech stock-heavy strategies might lose money fast in a market downturn. This highlights the risks of owning several shares in growing regions.
Indirect Bitcoin Exposure: A Growing Risk
Norges Bank holds interests in Bitcoin-heavy firms including Coinbase and Riot Platforms, giving it secondary exposure to Bitcoin. By 2024, the fund had $356 million in indirect Bitcoin exposure. Because these companies possess a lot of Bitcoin, price swings might harm Norges Bank’s assets.
The Unlikely Path to Bitcoin ETFs
Norges Bank is not likely to invest in Bitcoin ETFs like Abu Dhabi’s Mubadala. The fund’s investing strategy emphasizes equities and bonds. Risky investments like Bitcoin ETFs are unlikely. Norges Bank also sold all its gold holdings in 2004, demonstrating its usual risk management. Bitcoin may be a hedge, but an ETF investment is unlikely as it is still theoretical.
Active Investment: Room for Change?
Occasionally, Norges Bank makes bold investments, although their business approach is generally passive. Trond Grande, the fund’s deputy CEO, said risk may be changed. Still, the firm has been cautious regarding Bitcoin investments. However, the international economy is becoming less stable, so tactics may alter. Even if it doesn’t acquire Bitcoin, the fund may own more Bitcoin-heavy firms, increasing its indirect risk.
The Hedge Debate: Bitcoin’s Role
More people are wondering if Bitcoin can defend against unstable economies. Despite its volatility creating concerns, it has received attention as a store of value. Mubadala may use Bitcoin to hedge against inflation and market losses. It’s more interested in traditional businesses, thus Norges Bank probably won’t take Bitcoin.
Conclusion
Norges Bank’s $40 billion loss highlights the potential risks for diverse national wealth funds. The fund’s secondary Bitcoin exposure increases risk but highlights how evolving markets are affecting investing decisions. Norges Bank may invest in Bitcoin depending on global uncertainties, but it may reconsider its cautious approach to alternative assets. The fund may take a riskier approach or adhere to its tried-and-true methods.
