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Fidelity, Citi, and Goldman Sachs all made bitcoin headlines today, with Fidelity and Citi releasing extensive (and positive) reports on bitcoin, and Goldman Sachs announcing the restart of their bitcoin trading desk.
Mr Timmer also linked to a paper of his hosted on Fidelity Institutional, which suggests that bitcoin may be an appropriate replacement for some part "of the bond side of a 60/40 portfolio."
Next, Citi GPS released a 108 page report titled "Bitcoin At the Tipping Point". The report's intro notes:
In a search for yield and alternative assets, investors are drawn to Bitcoin's inflation hedging properties and it is recognized as a source of 'digital gold' due to its finite supply. ... Where could Bitcoin be in another seven or so years? The report notes the advantage of Bitcoin in global payments, including its decentralized design, lack of foreign exchange exposure, fast (and potentially cheaper) money movements, secure payment channels, and traceability. These attributes combined with Bitcoin's global reach and neutrality could spur it to become the currency of choice for international trade.
Finally, Reuters is reporting that Goldman Sachs has restarted their cryptocurrency trading desk, beginning with various bitcoin instruments. Reuters notes the bank is also exploring related bitcoin services:
the bank is also exploring the potential for a bitcoin exchange traded fund and has issued a request for information to explore digital asset custody, the source said.
Coinbase released their much-anticipated public S1 today, clearing the way for them to list their stock on public US equity markets, likely in a matter of weeks. Coinbase's listing on public markets is considered a watershed moment for bitcoin and crypto overall. It will likely open in excess of $100B market-cap, based on recent pre-IPO-contract trading figures. Some key insights from the S1 document include Coinbase's "Assets on Platform" figure of $90B, and total verified users figure of 43mm. Note that these figures do not include any 2021 data (during which they likely experienced significant growth). Two twitter threads diving further into the numbers are here and here.
One noteworthy stat from the document highlights the institutionally-driven nature of the current bitcoin rally vs the 2017/18 cycle:
Bloomberg is reporting that Square has purchased another 3,318 BTC for $170mm. This works out to an average price of $51,235 per BTC.
BlackRock's ($8.6T AUM) Rick Rieder - CIO of Global Fixed Income and Head of the Global Allocation Team, said on CNBC this morning that BlackRock has "started to dabble a bit into" bitcoin.
Mr Rieder specifically noted the search for viable "storehouses of value" as the backdrop for this:
Today the volatility of it is extraordinary, but listen... People are looking for storehouses of value. People are looking for places that could appreciate under the assumption that inflation moves higher and debts are building, so we've started to dabble a bit into it. ... My sense is the technology has evolved, and the regulation has evolved, to the point where a number of people find that it should be part of the portfolio, so that's what's driving the price up.
When pressed regarding what % allocation BlackRock has made to bitcoin or crypto in general, he declined to give specifics but elaborated on their reasoning by saying:
We're holding a lot more cash than we've held historically because duration doesn't work, interest rates don't work as hedge, so diversifying into other assets makes some sense. And so holding some portion of what you hold in cash in things like crypto seems to make some sense to me.
UPDATE 2: MicroStrategy has completed this purchase. Final tally: An additional 19,452 BTC was purchased for a total of $1.026 billion. Average purchase price was $52,765 per BTC.
MicroStrategy now holds 90,531 BTC, worth ~$4.43 billion as of this writing.
UPDATE: MicroStrategy has upsized this offering to $900mm, with a $150mm potential add-on, and announced that the notes will bear 0% interest. MicroStrategy expects the offering to close by Friday (Feb 19th)
MicroStrategy announced a proposed new debt offering of $600mm, with possible $90mm add-on. The announcement states: "MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoins." The notes are convertible to cash or $MSTR stock on or after February 20, 2024 and mature on February 15, 2027.
These debt offerings are in addition to MicroStrategy's conversion of their corporate treasury to mostly BTC, and ongoing smaller conversion of operating cash flow to BTC as part of their treasury reserve policy.
Bloomberg is reporting that: "A $150 billion Morgan Stanley investing arm [Counterpoint Global] known for its prowess in picking growth stocks is considering adding Bitcoin to its list of possible bets."
The story highlights pressure from clients, and competitive pressure vs other firms, as recent impetus for managers to add bitcoin to their investment universe:
Even institutional investors, barred by the rules of their funds from holding Bitcoin directly, have turned to such trusts. For Wall Street firms, an inability to offer Bitcoin to those clients raises the risk of losing them to other managers. That may spark fresh discussions in the industry about opening up to the asset.
Carl Quintanilla tweeted a Bloomberg Terminal screenshot indicating PayPal's plans to expand their crypto offerings to the UK "in coming months", as well as to their popular Venmo platform in the "first half" of this year:
The Wall Street Journal is reporting that Bank of New York Mellon Corp said today that that it will: "hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients"
In time, BNY Mellon will allow those digital assets to pass through the same plumbing used by managers’ other, more traditional holdings—from Treasurys to technology stocks—using a platform that is now in prototype. The bank is already discussing plans with clients to bring their digital currencies into the fold.
BNY Mellon's predecessor entity was founded in 1784.
Grayscale CEO Michael Sonnenshein appeared on CNBC's Squawk Box this morning to discuss bitcoin demand from corporate treasuries and institutions. Towards the end of the segment, Mr. Sonnenshein gave some insight into the demand they are seeing at Grayscale, relative to the demand spike that was seen in late 2020:
If flows are any indication of investor interest, on the heels of a record breaking 2020, very pleased to say and encouraged that momentum is not only continuing this year but is actually accelerating. So we're seeing very very sustained and growing demand, from a lot of institutional players at the moment.
In an SEC filing released today, Tesla disclosed that it has purchased $1.5 billion worth of Bitcoin, and further discussed plans to accept BTC as a form of payment for Tesla products.
The document states:
In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.
My view is, we did a lot of fundamental research, and if you consider the supply of bitcoin relative to the supply of gold in the world, and what the total value of gold is, if bitcoin were to go to those kinds of numbers, you’d be talking about $400,000 to $600,000 per bitcoin. Now, I'm not saying we'll ultimately get there, but that's an indication what might be a measure of fair value. That you gives you a lot of room to run.
Mr Minerd went on to strike a more balanced tone, suggesting bitcoin's recent run to just shy of $42,000 could be a speculative bubble which could retrace 50% from those highs. He elaborated:
But then when you consider that over the course of a month, we went from $20,000 to $40,000 on bitcoin, that smacks of short-term speculation. ... So you know bitcoin has had a lot of times where it's had setbacks of 50% form it's highs, I wouldn't be surprised to see that happen again.
However, he ended his comments on bitcoin with a decidedly positive long-term outlook, saying:
But I do want to say one thing, your comment about Elon Musk before we got started, Elon is definitely proven himself to be a visionary, and I think that crypto currency has come into the realm of respectability and will continue to become more and important in the global economy.
Visa announced a suite of APIs (application programming interfaces) that banks can use to offer bitcoin-related services, including buying and selling bitcoin, and related visa-card services.
Visa's crypto lead, Cuy Sheffield, explained to CoinDesk:
This is shifting to the next phase of Visa’s strategy where we’re looking at how Visa can also be a bridge between the thousands of financial institutions … and help them tap into the growing world of crypto assets and blockchain networks. We’re excited to see what early tests and consumer engagement look like for things like dollar-cost averaging to buy bitcoin or for things like earning bitcoin back as rewards.
MicroStrategy CEO Michael Saylor tweeted this morning that the company purchased an additional ~295 BTC for $10mm (at an avg price of ~$33,808).
Tesla and SpaceX CEO Elon Musk changed his twitter bio overnight to simply: #bitcoin:
This coincided with a substantial rally in bitcoin's price:
Bridgewater Associates released a 14-page report [UPDATE: see it here] on Bitcoin as part of their daily newsletter (shared with CaseBitcoin), including comments from founder Ray Dalio. Dalio takes care to note his relative ignorance on bitcoin, but overall, his tone is one of appreciating bitcoin's fundamentals, yet remaining very cognizant of certain risks.
Mr. Dalio says "Bitcoin is one hell of an invention", and in further appreciation of bitcoin's core value proposition, he notes:
Because of what is going on in the world, besides there being a growing need for money or storehold of wealth assets that are limited in supply, there is also a growing need for assets that can be privately held.
But his overall tone is balanced. He highlights two specific risks which give him pause:
Although Bitcoin is limited in supply, digital currencies are not limited in supply because new ones have come along and will continue to come along to compete so the supply of Bitcoin like assets should, and competition will, play a role in determining Bitcoin and other cryptocurrency prices. [CaseBitcoin note: this is common bitcoin critique #6]
When I a) put myself in the shoes of government officials, b) see their actions, and c) hear what they say, it is hard for me to imagine that they would allow Bitcoin (or gold) to be an obviously better choice than the money and credit that they are producing. [CaseBitcoin note: this is common bitcoin critique #2]
Dalio concludes his commentary by noting:
On the other hand, believe me when I tell you that I and my colleagues at Bridgewater are intently focusing on alternative storehold of wealth assets and expect Bridgewater to soon offer an alt-cash fund and a storehold of wealth fund in order to better deal with the devaluation of money and credit that we consider to be a major risk and opportunity, and Bitcoin won’t escape our scrutiny.
The letter goes on to provide an analysis of bitcoin's fundamental properties, benefits, risks, and market structure. Overall the piece provides a balanced assessment (though we would take issue with some of the commentary and analysis), and concludes by stating: 'Bitcoin, for now, feels more to us like an option on a potential storehold of wealth.'
Coindesk is reporting that Harvard, Yale, Brown, and some other colleges & universities, have been purchasing BTC for their endowments, possibly dating as far back as 2019. Coindesk quoted one of their two sources as saying:
It could be since mid-2019. Most have been in at least a year. I would think they will probably discuss it publicly at some point this year. I suspect they would be sitting on some pretty nice chunks of return.”Yale's CIO, David Swenson, made headlines in 2018 by investing in 2 crypto funds, though those likely had large equity components at the time, and weren't bitcoin specific. The move was widely regarded as reducing career risk for other managers who may have sought to make similar moves. If Coindesk's sources are accurate, that appears to have paved the way for several CIOs to directly add BTC itself to their organizations' endowments.
Marathon Patent Group - a Nasdaq-listed bitcoin mining company, announced that they converted a little under a third of their corporate treasury to BTC. The purchase totaled about $150 million.
As reported by The Block, Marathon CEO Merrick Okamoto explained:
By leveraging our cash on hand to invest in bitcoin now, we have transformed our potential to be a pure-play investment into a reality... We also believe that holding part of our treasury reserves in bitcoin will be a better long-term strategy than holding U.S. dollars, similar to other forward-thinking companies like MicroStrategy.
MicroStrategy CEO Michael Saylor announced the purchase of 314 BTC for $10.0mm this morning for their corporate treasury, bringing the company's total BTC holdings to ~70,784 BTC, worth about $2.3B (Jan 22 2021).
The SEC form 8k for the sale, dated Jan 22 2021, noted that the BTC was purchased at an average price of $31,808 suggesting MicroStrategy saw yesterday's BTC price drop (from ~$35,000 to briefly under $30,000) as an opportunity to add to their position.
Recent SEC filings from BlackRock (over $7T AUM) contain language suggesting they may participate in bitcoin futures markets, stating: "Certain Funds may engage in futures contracts based on bitcoin".
The Block further reports:
To be sure, the filings themselves don't definitively say that BlackRock funds are on the cusp of buying bitcoin futures, nor do they indicate whether BlackRock might buy futures that settle in cash or in actual bitcoin. But such filings have been known to predate these kinds of moves, indicating that BlackRock is at least laying down the regulatory tracks to conduct allocations if it so chooses.
Anthony Scaramucci, Founder of SkyBridge Capital, reiterated recent statements from NYDIG CEO Robert Gutmann noting that the high-dollar institutional interest in 'crypto' is exclusively limited to Bitcoin, in his experience. Mr Gutmann explained:
100 out of 100 of the last conversations I’ve had with investors seriously looking to allocate, let's say over 50 million dollars, 100% of those conversations have been about Bitcoin and 0% of them have been about any other crypto asset
We [at] SkyBridge are also focused exclusively on #Bitcoin and feel it will be the big winner. FWIW most institutions we talk to have a similar view.
We want to be one of the most crypto-forward and technological cities in the country. So we're looking at … creating a regulatory framework that makes us the easiest place in the United States to do business if you're doing it in cryptocurrencies.
Mayor Suarez also specifically noted the possibility of putting Bitcoin on the City of Miami's balance sheet, plus some of the reasons why it can be considered an attractive investment:
We're looking at the possibility of diversifying our investment portfolio and holding a percent of our investments in bitcoin.
The fact that it is limited, the fact that other governments use currencies to do a variety of things that have nothing to do necessarily with the exchange of goods, but to implement public policy, I think has made bitcoin a very attractive investment for many people.
Well known investor Howard Marks' latest investor letter indicates that he is at least somewhat warming up to bitcoin as a viable investment. In the past (2017, with BTC ~$2500), he has dismissed bitcoin as "not real", but his position now seems firmly neutral:
Thus, I've concluded (with Andrew's help) that I'm not yet informed enough to form a firm view on cryptocurrencies. In the spirit of open-mindedness, I'm striving to learn. Until I do, I'll be referring all requests for comments on the subject to Andrew (although I'm sure he'll decline).
The "Andrew" Howard refers to is his son, who is apparently much more on board with Bitcoin as a viable investment. Howard noted:
Back in 2017, my memo There They Go Again...Again included a section on cryptocurrencies in which I expressed a high level of skepticism. This view has been a source of much discussion for me and Andrew, who is quite positive on Bitcoin and several others and thankfully owns a meaningful amount for our family.
Switzerland's largest bank, UBS, announced today that they will begin charging clients with balances in excess of 250,000 Swiss francs (about $280,000) a 0.75% interest rate.
UBS explained why:
It’s becoming increasingly clear that we’ll have to contend with negative interest rates for years to come. That’s why we decided to lower the threshold for deposit fees,” Swiss banking head Axel Lehmann told employees in the memo.
SkyBridge Capital released the investment deck for their new SkyBridge Bitcoin Fund. The deck walks through the investment case for bitcoin, covering everything from recent Wall St embrace of bitcoin, to bitcoin vs gold, the regulatory landscape, risks, and bitcoin as a monetary life raft.
The deck calls bitcoin "better at being gold than gold" and notes that BTC would have to trade at $535,000 if it reached market capitalization parity with gold.
Holger Zschaepitz noted on twitter that outflows from gold ETFs since October have been over $7B, while inflows into GBTC, the Grayscale Bitcoin Trust, have been around $3B:
Zschaepitz further noted JP Morgan's take on the data:
Competition w/gold as alternative currency will continue given millennials will become over time more important.
Yassine Elmandjra, cryptoasset analyst at ARK Invest, observed that bitcoin's total on-chain transaction volume is about to cross $10 trillion.
Bitcoin is up over 250% in 2020, and over 40% in the past month alone. It's natural to wonder if the bitcoin rally has more to go, or if it's reached a longer-term top. Thankfully, we can look at both onchain network data, as well as price data, and compare to prior bitcoin cycles.
Analyst Willy Woo has done just that, comparing the growth in realized cap (a proxy for aggregate entry price) that we see now vs the 2017 bull run. Willy finds that growth now is comparable to April 2017:
Anythony Scaramucci's SkyBridge Capital Filed with the SEC to create a subsidiary named 'SkyBridge Bitcoin Fund L.P.'. This follows previous news about SkyBridge showing interest in digital assets, but the fund name suggests more affinity for Bitcoin specifically.
Jefferies global head of equity strategy - Christopher Wood - reportedly trimmed his portfolio's gold holdings to make room for Bitcoin. He wrote:
The 50 per cent weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in Bitcoin. If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position
Coinbase - one of the most popular 'on ramps' for Bitcoin in the US - today announced that it has filed a draft form S-1 with the SEC, typically a precursor to an Initial Public Offering. A Coinbase IPO has been anticipated for some time.
With both bitcoin and US equity markets making all-time-highs, there could be significant excitement for Coinbase's IPO. As a recent example of exuberance for tech IPOs, AirBnB popped to more than double its IPO price on the first day of public trading last week.
Guggenheim's Scott Minerd stated on Bloomberg TV, while Fed Chair Jerome Powell was giving his FOMC meeting Q&A, that 'our fundamental work shows that bitcoin should be worth about 400,000 dollars'
When pressed regarding how Guggenheim arrived at that figure, he elaborated:
It's based on the scarcity and relative valuation to things like gold as a % of GDP. So bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions.
Bloomberg terminals are reporting a new fund created by One River Asset Management CEO Eric Peters, with support from Alan Howard, to 'seize on the growing interest in cryptocurrencies among institutional investors.'
$600mm in BTC and ETH have been purchased to date, with the total set to exceed $1B in early 2021
UK Investment Manager - Ruffer Investment Co - announced today that they have allocated 2.5% of their portfolio (£20B total AUM) to Bitcoin, calling it a 'small but potent insurance policy against the continuing devaluation of the world's major currencies.'
Additionally, they noted they made the BTC allocation in November, after 'reducing the company's exposure to gold.' Full text:
Performance Update & Manager Comment We wanted to give shareholders a short update on performance this year and to let you know about a new allocation to the digital currency bitcoin. The portfolio has made strong progress amid the turmoil of 2020. To the 8th December NAV point the NAV total return is 12.2%. During the panic back in March, the protective assets did all we hoped they would. In the spring and early summer, gold and the inflation-linked bonds performed well. More recently, the economically sensitive equities have reacted very positively to the success of the covid-19 vaccines, leading the portfolio higher. One recent addition, via one of the specialist managers appointed within the Ruffer Multi-Strategies Fund, has been bitcoin. This is primarily a defensive move, one made in November after reducing the company's exposure to gold. The exposure to bitcoin is currently equivalent to around 2.5% of the portfolio. We see this as a small but potent insurance policy against the continuing devaluation of the world's major currencies. Bitcoin diversifies the company's (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.
According to Bloomberg, JPMorgan suggested in a note on Friday that MassMutual's $100mm investment in BTC for their general account significantly derisks BTC holdings in the eyes of other typically-conservative institutional money managers:
"MassMutual’s Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors," the strategists said. "One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example."
If pension funds and insurance companies in the U.S., euro area, U.K. and Japan allocate 1% of assets to Bitcoin, that would result in additional Bitcoin demand of $600 billion, the strategists said.
Charlie Bilello tweeted a matrix of asset-class returns, with Bitcoin returns dominating every other asset by orders of magnitude:
Bloomberg terminals are apparently reporting a Dow Jones Newswires story that Mass Mutual - an insurance firm founded in 1851 - has invested $100mm in Bitcoin:
UPDATE: Wall Street Journal coverage: MassMutual Joins the Bitcoin Club With $100 Million Purchase
MicroStrategy is upsizing their prior $400mm convertible debt-offering, which is earmarked for BTC purchases, by $150mm-$250mm. The offering is now $550mm, with an additional $100mm follow-on option, and is expected to close private-placement Dec 11th. The notes mature in 2025, and may be converted to equity (at a 37.5% premium to current $MSTR price) at the company's election.
Bitwise Investments launched a public-traded crypto index fund, under the ticker $BITW, composed of the top-10 crypto-assets. The index is market-cap weighted, and is currently over 76% Bitcoin.
As a timely example of how to use these metrics, Glassnode CTO Rafael Schultze-Kraft tweeted a thread looking at various on-chain metrics for bitcoin, and where they sit currently compared to the peak of bitcoin's 2017 run from ~$1000 to ~$20,000.
MicroStrategy - having already purchased close to $500mm in BTC (which has since appreciated substantially) - announced today that it plans to issue $400mm in senior unsecured convertible notes, and use the proceeds to buy more bitcoin:
The notes will be unsecured, senior obligations of MicroStrategy and will bear interest payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The notes will mature on December 15, 2025 MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.
Bloomberg reports that the Bank of Japan is now the largest holder of Japanese equities, with over $400B in holdings:
After moderating a webinar on 'The State of Crypto Prime Brokerage', Frank Chaparro notes:
Bold prediction by Michael Moro, CEO of GenesisTrading, one of the largest crypto trading firms: Based on the activity he is seeing, he predicts 250 publicly traded companies will allocate a portion of their balance sheet to Bitcoin in the next year.
Larry Fink, CEO of Blackrock - the world's largest asset manager, with over $7 trillion under management - updated his stance on Bitcoin yesterday, now acknowledging its potential global relevance. In a conversation with Bank of England governor Mark Carney, he said: "Can it evolve into a global market? Possibly." Forbes reports:
Fink, who was answering questions alongside former Bank of England governor Mark Carney, said the level of attention generated by previous BlackRock comments on bitcoin showed how the cryptocurrency has "caught the attention and the imagination of many" who are "fascinated and excited by it." "Can [bitcoin] evolve into a global market," Fink asked. "Possibly. [Bitcoin is] still untested, a pretty small market relative to other markets. You see these big giant moves every day. It’s a thin market."
AllianceBernstein (~$600B AUM) co-head of portfolio strategy, Inigo Fraser Jenkins, suggests Bitcoin has a role to play in investor portfolios. Coindesk reports:
... post-pandemic changes to the policy environment, debt levels and diversification options for investors mean the asset manger now has “to admit [bitcoin] does” have a role in asset allocation, at least over the long term. Fraser Jenkins said the “significant reduction” in the volatility of bitcoin’s price makes it more attractive both as a store of value and as a medium of exchange.
Author of The Ascent of Money and Stanford Fellow, Niall Ferguson, authored a Bloomberg Opinion piece today in which he argues Bitcoin is "scarce, sovereign and a great place for the rich to store their wealth." He elaborates:
What is happening is that Bitcoin is gradually being adopted not so much as means of payment but as a store of value. Not only high-net-worth individuals but also tech companies are investing. In July, Michael Saylor, the billionaire founder of MicroStrategy, directed his company to hold part of its cash reserves in alternative assets. By September, MicroStrategy’s corporate treasury had purchased bitcoins worth $425 million. Square, the San Francisco-based payments company, bought bitcoins worth $50 million last month. PayPal just announced that American users can buy, hold and sell bitcoins in their PayPal wallets.
Guggenheim Funds - managing a total $233B - filed an amendment with the SEC to allow their subsidiary Guggenheim Macro Opportunities Fund, with ~$5B under management, to be able to invest up to 10% of the fund into GBTC.
GBTC is a publicly traded vehicle representing shares of the Grayscale Bitcoin Trust which invests solely in Bitcoin. Given the failure of the SEC to approve a Bitcoin ETF, GBTC has become the de-facto Bitcoin ETF-like product for US markets. It almost always trades at a substantial premium to net-asset-value due to various details of the fund's underlying operating rules.
Cory Klippsten, CEO of Swan Bitcoin, observes that Bitcoin is currently trading at double its 2017 all-time-high when priced in Turkish Lira:
Biden unveiled Janet Yellen as his pick for Treasury Secretary, yesterday, suggesting a tight working relationship between treasury and Jerome Powell's Fed. Powell's recent re-orienting of the Fed towards tolerating higher inflation and focusing more on employment goals dovetails well with some of Yellen's recent comments:
“While the pandemic is still seriously affecting the economy we need to continue extraordinary fiscal support, but even beyond that I think it will be necessary,” Yellen said Oct. 19 on Bloomberg Television. “We can afford to have more debt,” she added, because interest rates will probably be low “for many years to come.”
In Pantera's November 2020 Blockchain Letter, titled Bitcoin Shortage, they observe that bitcoin volumes on Paxos, the underlying crypto partner for PayPal, have gone through the roof since PayPal enabled crypto purchases on Nov 12th:
Pantera goes on to note that it looks like PayPal alone - after just one week of operation - is "buying almost 70% of the new supply of bitcoins".
CIO of Blocktower Capital, Ari Paul, tweeted today shedding some light on where the bitcoin buying pressure has come from that's pushed BTC from $10,000 over the summer, to over $18,000 today. In short: HNWs. Ari explains:
Anthony Pompliano ("Pomp") tweeted video of a CNBC interview this morning with BlackRock CIO of Global Fixed Income & Head of Global Allocation, Rick Rieder. Mr Rieder compared Bitcoin to gold, saying:
Do I think [bitcoin] is a durable mechanism that will take the place of gold to a large extent? Yeah I do...
Additionally, Mr Rieder took specific note of millennials' acceptance of digital money systems generally in making the case that bitcoin is here to stay and is something to pay attention to.
Liz Ann Sonders tweeted a chart from Bianco Research showing that the US Federal Reserve now holds more US Treasury bonds than all other central banks combined:
Mexican billionaire Ricardo Salinas Pliego (net worth: $13.2B) disclosed via twitter that 10% of his "liquid portfolio" is currently invested in bitcoin:
A report by Citibank Managing Director Tom Fitzpatrick surfaced over the weekend, drawing strong fundamental analogies between bitcoin today, and the gold market of the 1970s. The report cites recent macro-economic events as analogous to closing the gold window in the early 1970s, and Bitcoin as "21st century gold", experiencing rapid monetization and financialization in response to structural macro changes.
Fitzpatrick goes on to analyze bitcoin's price cycles, and arrives at perhaps the largest medium term institutional price target we've seen for BTC: $318,000 by the end of 2021:
Incoming US Senator from Wyoming, Cynthia Lummis, discusses how she wants to make bitcoin "part of the national conversation", how she thinks bitcoin "fits the bill" as a store of value, and comments on bitcoin's finite supply as a key factor in her belief that bitcoin will be "an important player in stores of value for a long time to come."
Eric Pomboy of Meridian Macro Research pointed out last week that there's now $17.05 trillion in negative yielding debt globally, a new high:
In a recent report on the Grayscale Bitcoin Trust, JPMorgan took a look at flows into BTC products vs Gold ETFs, and concluded:
What makes the October flow trajectory for the Grayscale Bitcoin Trust even more impressive is its contrast with the equivalent flow trajectory for gold ETFs, which overall saw modest outflows since mid-October. This contrast lends support to the idea that some investors that previously invested in gold ETFs such as family offices, may be looking at Bitcoin as an alternative to gold.
Ryan Watkins of Messari reports that Square Cash bitcoin purchases in Q3 nearly doubled the then-record-setting Q2:
Luke effectively points out that the US government has no choice, no matter which party is in office. The dollar must be debased to keep the economy functioning.
Crypto Voices Update #10 is out, documenting bitcoin's progress as a global monetary asset. Now #10 in terms of monetary base, outside of gold and silver:
Dan Tapiero comments on the longer-term effects of Jerome Powell's pandemic response, noting the unprecedented rise in US M2 and ramifications for US treasuries as a a good investment vehicle.
Lyn Alden compares year-to-date performance of various asset classes, showing Bitcoin's clear out-performance:
Bitcoin and gold were very correlated during Fed Chair Powell's "Jackson Hole" speech earlier today. They both "faded the fed" fairly quickly, but the correlation is significant and undeniable nonetheless.
Glassnode has an interesting 'accumulation address' metric defined, which tries to quantify store-of-value behavior. Such behavior is hitting all-time-highs:
Research and data firm Coinmetrics charts each of Bitcoin's major market cycles, from bull market start to the eventual top. If history is any guide, the duration of bitcoin's cycles are extending:
Glassnode highlights a 3yr high in the % of BTC supply that hasn't moved in 2yrs:
Last week we covered public-traded company MicroStrategy's decision to put $250mm of their corporate treasury into Bitcoin as a prudent move to hedge inflation. Today, we see another annoucement to this effect by online graphics company Snappa. CEO Christopher Gimmer explains the reasoning behind the move:
After pouring over the research myself, I believe that massive amounts of quantitative easing combined with fiscal stimulus will continue to result in currency debasement. In addition, I expect governments to keep doing more of the same in attempts to fight the natural deflationary pressures of technology. In order to hedge this risk, we’ve chosen to adopt Bitcoin as a primary reserve asset on our balance sheet.
More companies are viewing BTC as a prudent diversification strategy for treasury holdings as macro-concerns regarding fiat sustainability intensify. This trend can be thought of as analogous to companies that operate internationally hedging currency risk by holding various other currencies. More companies are simply realizing they are exposed to *fiat* risk no matter where they operate, and are starting to see BTC as an appropriate hedge.
Additionally, Mr. Gimmer referenced a number of key pieces we catelog in the CaseBitcoin Library:
Crypto Voices Q2 "Global Monetary Base" report puts bitcoin as the #10 money in the world, excluding gold and silver.
This report - released via tweet storm - takes detailed stock of the landscape of money globally, from fiat M1/M2/M3 discussion, to gold and silver, to bitcoin, and trends between them.
Lyn Alden notes on twitter:
YTD through June, over $3T in net Treasury issuance occurred for stimulus, and foreigners only bought $194B. So, the percent of US federal debt held by the foreign sector has dropped to the lowest percentage in over a decade, and the biggest buyer during this year was the Fed.
Today is the 49th anniversary of when President Richard Nixon severed the final ties between the dollar and gold. The US had been creating and spending more dollars than it had gold reserves for decades, and markets were forcing the US to finally admit it, lest USD holders convert too much to gold thereby draining US gold reserves completely.
Publicly traded company business intelligence company MicroStrategy ($MSTR) disclosed today that they acquired 21,545 BTC (~$250m) as part of capital allocation strategy for their corporate treasury.
They cited the following key reasons for the allocation:
This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. ... MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.”
“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it.
The IMF Executive Board concluded a consultation with the United States, during which they suggest that the US Federal Reserve has room for more asset purchases:
The Fed has been laying the ground-work recently to try and run inflation higher than their official 2% target, in order to "make up" for inflation being lower than target for much of the past decade.
The Office of the Comptroller of the Currency (OCC) formally stated today that nationally chartered banks can hold cryptocurrencies on behalf of their customers. This has been a long-standing regulatory block to banks and other financial institutions being able to provide bitcoin-related services to customers.
Peter Van Valkenburgh at CoinCenter explains:
National banks entering the game expands that competition and may also allow more traditional institutional investors to deal in cryptocurrencies. Several regulated entities are bound by financial regulatory laws to use and only use chartered banks for custodial services, and in a world where chartered banks are not holding crypto that can leave several investors with a defacto ban on large scale participation in crypto markets.
Lyn Alden joins Nic Carter to discuss the global monetary system, QE, inflation, parallels to the 1930s and 1940s, and what it may mean for Bitcoin.
Lively conversation between QTR and Danielle Di Martino Booth, a former Federal Reserve insider, and author of 'Fed Up - An Insider's Take on Why the Federal Reserve is Bad for America'.
Danielle points out a number of things, with macro relevance to Bitcoin
Fidelity surveyed 774 "large institutional investors" and found that over 25% reported that they hold bitcoin.
Tom Jessop, President of Fidelity Digital Assets, noted: “Europe is perhaps more supportive and accommodating.....[that could] be just things going on in Europe right now, you got negative interest rates in many countries. Bitcoin may look more attractive because there are other assets that aren’t paying return.”
We would like to see how the survey was constructed, as these numbers seem high. While it's clear institutional involvement has been accelerating, we are very surprised to see 25% ownership of bitcoin. In any event, the report indicates further legitimization for institutional ownership of bitcoin following Paul Tudor Jones' bullish macro letter identifying bitcoin as the best way to play coming inflationary macro pressures.
Crypto prime broker Grayscale has purchased 50% more BTC than miners have mined since May 11th, as shown here:
No matter how you slice it, this is bullish for bitcoin. Critics rightly point out that much of that demand is likely due to accredited investors playing the spread between the underlying spot price and the $GBTC asset which is trading at a premium, but that still translates to net buying pressure. Dan Matuszewski, former head of OTC at Circle and now founder of trading firm CMS Holdings discuss this further in a twitter thread.
Goldman Sachs released a report today discussing broad macro topics, as well as gold and bitcoin. Suffices to say, they are not fans of either gold or bitcoin, summarizing their thoughts on bitcoin with this slide:
These critiques are nothing new. CaseBitcoin addresses all of them on our critiques page. Brief rebuttals include:
Messari takes a macro-oriented and data-driven approach to making a very strong investment case for Bitcoin, culminating in a comparison to gold which suggests a 6300% upside potential:
The core thesis is build around the observations that:
The investment case for bitcoin is especially strong right now, because:
At 4:02 EDT today bitcoin's 630,000th block was mined, marking a once-every-four-years reduction of the rate at which new coins are issued on bitcoin's blockchain. That rate now works out to 1.85% annualized, which is below both the Federal Reserve's 2% inflation rate target, and most importantly for the up and coming "digital gold", below gold's estimated newly mined annual supply.
Bitcoin's halving is no surprise, as it's been built into the codebase since bitcoin launched in 2009. It is the 3rd halving event in a series of 33 hard-coded halving events which take place automatically, and without human deliberation, through the year 2136. This makes bitcoin the only money system which will credibly and predictably reduce its supply over time.
Paul Tudor Jones says he's allocating potential "low single digit percentage" of his flagship BVI macro fund to bitcoin, on the grounds that it's probably the best inflation hedge, and reminds him of gold in the 1970s.
Other macro traders were quick to point out that the signal this sends to the rest of the institutional money world is the real story here:
Tudor Jones makes four extremely btc-bullish points:
In the aftermath of the great recession, the Eurozone experienced an existential crisis as political tensions flared over how to deal with deeply indebted member states such as Spain, Italy, Portugal, and Greece. Here in 2020, it's happening again. These countries were hit harder than most by corona-virus, and Europe's lack of fiscal and monetary union means political strife, instead of the shotgun (but happy) marriage of Mnuchin and Powell which allowed the US to act swiftly and in size.
Get ready for years of Eurozone bickering and, dare we say, countries threatening to leave the EU. Again.
Fed official confirms that interest rates will remain low for years, not months. Of course - since there's no way the US government could pay back its debts if rates aren't extremely low forever!
Jeff Booth convincingly lays out the case for tech-driven deflation as the defining macro narrative, and how it requires central-banks to inject exponentially increasing amounts of new money into the system. Jeff goes on to suggest bitcoin as one of the few ways to play this trend, and emphasizes its asymmetric return profile.
It's been a joke since 2013 that Coinbase crashes during big moves. Their largely retail customer base flocks to the site and they still can't handle the spikes.
Alex dissects bitcoin's price movements during the Jan 7th Iran attacks, finding remarkable (and bullish) correlation:
Yan is deep on bitcoin on both macro-economic and technical levels. A must listen.