2021 – The Year Institutional Money Will Pour Into Bitcoin
2020 is turning out to be quite a year for Bitcoin. After the 55% drop on 12 March, Bitcoin has bounced back impressively and caught the eye of more institutions on its way up.
MicroStrategy might have caught the headlines after using $425 million of its balance sheet to buy Bitcoin, but corporate money is pouring into Bitcoin from many other quarters.
There is an estimated $6.85 billion worth of Bitcoin on corporate balance sheets to date. And with the macro set up looking like a perfect storm for Bitcoin, many believe this year will be nothing but a preface for 2021.
Wasn’t 2018 Supposed To Be The Year of The Institution?
2018 was touted as the year institutional money would flood Bitcoin and the crypto space at large.
After a massive run up to Bitcoin to USD $20,000, and the cryptocurrency market reaching almost $800 billion in late 2017, the year of promise quickly turned into a long, hard crypto winter.
But the truth is, the infrastructure wasn’t there for institutions to get involved back then. There were hardly any regulated exchanges or custody services, and although Bitcoiners frown upon that, institutions demand it.
Now we have the infrastructure, and more is on the way. And the timing couldn’t be better for Bitcoin.
2020 Has Been A Great year For Bitcoin
MicroStrategy might have grabbed the headlines of late, but it isn’t the only public company that’s been racing to buy Bitcoin in 2020.
There are many large companies now holding Bitcoin as a corporate reserve asset. Of course, we know about MicroStrategy using almost all its treasury to buy 38,250 bitcoins.
Then there was the news last week about Jack Dorsey and Square spending $50m to buy Bitcoin. This news didn’t come as such a shock as everyone knows how big Jack Dorsey is into Bitcoin, but $50m is still a significant amount of money, and the payments company bought 4,709 bitcoins.
Grayscale launched in 2013 and has been public since 2015. It has an estimated 450,000 bitcoins in its institutional grade Bitcoin fund (GBTC) at an aggregate price of just under $5 billion.
Then there’s Digital Asset firm Coinshares with Bitcoin hedge funds and ETPs. The UK-based company has an estimated 69,730 bitcoins at an aggregate price of $793 million in its portfolios.
Let’s not forget Mike Novogratz’ Galaxy Digital, which owns 16,551 bitcoins in its fund, worth about $190 million.
There are 15 known publicly funded companies involved with Bitcoin so far, and with a combined $6.01 billion worth of Bitcoin, they have taken 2.89% bitcoins off the market.
A Perfect Storm Has Brewed For Bitcoin
It seems like governments around the world are racing to debase their currencies. And with banks offering zero and negative interest rates, investors are naturally drawn to uncorrelated assets such as Bitcoin.
Macro strategist Raoul Pal said a perfect storm had brewed for Bitcoin. The former Goldman Sachs hedge fund manager expertly spelled out his fears for the global economy and excitement for Bitcoin.
Pal said macro and Bitcoin technical analysis was all coming together at the perfect time, and everything seemed to be falling into place.
‘Bitcoin and the macro world were on two separate paths that were converging and they‘ve just met,’ said Pal. ‘A perfect storm where everyone is about to come into the space, and Bitcoin looks like on the chart pattern that it’s about to outperform everything.’
Pal also recently said he believed Bitcoin would reach $1 million by 2025. 1 Bitcoin to USD $1m might seem like a fantasy for most, and we have heard it all before, but Pal knows his reputation is on the line.
That’s in five years anyway, and it will be a volatile run up wherever we reach. But many are predicting institutions to FOMO in and buy Bitcoin.
2021 – The Year Institutional Money Will Pour Into Bitcoin
Institutions are now ready to get involved with Bitcoin. Financial giant Fidelity has been involved with Bitcoin for many years, and has recently upped its investment.
Fidelity has been mining Bitcoin since 2015, and is now rolling out custody services for its clients. And today, the financial whale published a report recommending portfolios include at least 5% in Bitcoin.
Titled Bitcoin Investment Thesis, Fidelity Digital Assets demonstrates how portfolio managers could increase their returns by allocating a portion of their holdings to Bitcoin.
The report says Bitcoin’s market cap was ‘a drop in the bucket’ compared with the market caps it was set to disrupt, and projects increased institutional interest will bloat Bitcoin’s market cap by hundreds of billions of dollars.
Fidelity cites Bitcoin’s uncorrelation as reasoning for getting some Bitcoin exposure, claiming Bitcoin is less exposed to the economic headwinds that all other markets are facing.
Fidelity has $3.3 trillion AUM, so if it follows its own lead and invests 5%, that would be an additional $165 billion flooding into Bitcoin.
And as its custody service rolls out, it’s hard to imagine at least 5% of that not flooding into Bitcoin.
And that’s just Fidelity. We know Nasdaq owners ICE has heavily invested in the space, and its exchange, Bakkt, regularly sees new all time highs for its Bitcoin-backed futures trading.
Added with the halving cycle that many are expecting to roll out, it’s hard to argue that it isn’t following textbook. If it continues, 2021 might turn out to be a year like no other in Bitcoin’s short history.
It’s All Perfect Timing For Bitcoin
2020 has been a bullish year for Bitcoin. We’ve had Wall Street legend Paul Tudor Jones endorse Bitcoin, calling it the ‘fastest horse in the race’.
We’ve had Grayscale grow its Bitcoin fund exponentially, and now we see corporate treasuries having to get exposure to Bitcoin.
The narrative of ‘magic Internet money’, and ‘money for drug dealers’ is quickly changing, and now Fidelity is set to offer Bitcoin to its clients.
Raoul Pal called it a perfect storm, but still scarred from the crypto winter many hodlers can’t bring themselves to believe. But it’s hard to argue against it looking like a perfect set up.