There are many indications that 2020 has become a “watershed” year for institutional investor adoption of bitcoin.
This year, institutional investors’ attitudes toward bitcoin have shifted dramatically from early disdain to active learning and adoption.
From Nasdaq-listed companies such as MicroStrategy, which has already bought Bitcoin, to SkyBridge Capital and Guggenheim Macro Opportunities Fund, which is preparing to invest heavily in Bitcoin, to Bridgewater Fund founder Ray Dalio’s change in attitude, it is clear that Wall Street is making great strides into cryptocurrencies.
So, how will these giants, who hold a lot of wealth in their hands, buy bitcoin, and how will these investment institutions change their attitude?
1. Wall Street Institutions Running In
There is no doubt that Wall Street institutions are running in crypto.
In November, analysts at JPMorgan said in their “Flow and Liquidity” report that the pace of institutional investment in bitcoin was stronger in Q4 2020 than in Q3, and that institutional investors were looking at bitcoin as a long-term investment.
At almost the same time, Christine Sandler, head of marketing and sales at Fidelity Investments, said that 2020 is shaping up to be a watershed year for institutional entry into Wall Street, with bitcoin and other cryptocurrencies being heavily adopted by institutional investors. Historically, Fidelity’s clients have included retail investors, high-net-worth individuals, family financial rooms, registered investment advisors, hedge funds and endowments. However, it wasn’t until 2020 that Bitcoin saw a major shift in institutional investing.
According to Fidelity Investments’ survey, institutional investors showed “some interest” in bitcoin in 2018, and increased in 2019. 2020 will be the most volatile and decisive year for bitcoin, and it will be a “watershed” year for institutional adoption.
The actions of the investment giants are the best response to this trend.
On December 2, the New York Digital Investment Group (NYDIG) raised $150 million for two new funds that invest in cryptocurrencies. In additional, NYDIG Digital Asset Fund I raised $50 million from institutional investors, while NYDIG Digital Asset Fund II raised $100 million, according to two Securities and Exchange Commission filings.
Of which, $50 million of Fund I was invested entirely in Bitcoin.
Earlier, on Nov. 29, the Guggenheim Macro Opportunities Fund, which has nearly $5 billion under management and focuses on a variety of assets including stocks, commodities, alternative investments and bonds, filed an amendment with the U.S. Securities and Exchange Commission to allow it to invest 10 percent of its fund in GBTC.
According to public data, even 10% of its capital volume is close to $500 million, which is equivalent to about 27,000 bitcoins.
Coincidentally, on November 3, Skybridge Capital, a leading U.S. hedge fund, filed an amendment with the SEC seeking permission for its $3.6 billion funds to begin investing in bitcoin. According to public data, the Skybridge fund currently manages over $12 billion in total assets, more than twice the size of the Guggenheim.
In addition, the pace that institutional investors are buying bitcoin through grayscale is growing rapidly.
According to Grayscale public data, its Bitcoin Investment Trust (GBTC) averaged $254.41 million in trading volume in November, compared to $95.87 million in October, making November the second-highest month on record, which is just behind December 2017’s $422.95 million in trading volume.
It should also be noted that the Grayscale Bitcoin Trust has purchased nearly twice as many bitcoins as it has mined in the same period.
It is no exaggeration to describe these institutions are running into crypto.
In addition, the pace at which bitcoin is being retailed is also growing rapidly.
2. North American Bitcoin Retail is Growing Fast
According to a Reuters report in early December, bitcoin purchases in North America are growing rapidly as bitcoin’s current bull market reached an all-time high on Dec. 1.
In addition, according to ChainAnalysis, trading volume on the four major North American platforms doubled in 2020 to 1.6 million bitcoins per week by the end of November, while volume on the 14 major East Asian exchanges rose only 16% to 1.4 million bitcoins.
Besides, PayPal and Square’s bitcoin retailer numbers are also skyrocketing.
On November 21, cryptocurrency investment firm Pantera Capital reported on its website that PayPal and Cash App are buying all newly issued bitcoins.
PayPal, for example, currently purchases about 600 to 700 bitcoins per day, and Square purchases about 400 bitcoins per day, both of which are retail buyers of bitcoin. The current output of bitcoin miners is about 900 bitcoins per day, which means that the new bitcoin output is barely enough to satisfy their purchases.
Hesitant Wall Street institutional investors are changing their tune, most notably Bridgewater Co-Chairman Ray Dalio.
3. Institutional Giants are Changing Attitudes
Ray Dalio is a hedge fund manager and an American billionaire who founded Bridgewater Associates and has served as Co-Chief Investment Officer since 1985. Bridgewater Fund is the world’s largest hedge fund, with approximately $140 billion assets under management. Dalio has been called the “Steve Jobs of investing” by AICIO magazine and Wired magazine. He has also been named one of the 100 most influential people by Time magazine.
At the end of January this year, the global financial markets were volatile and treacherous. At that time, Ray Dalio stated in an interview that Bitcoin currently does not meet the two main use cases for money: store of value and medium of exchange. As a result, central banks are unlikely to hold the cryptocurrency, and will instead hold gold.
As a traditional financial market investor, he was naturally resistant to Bitcoin.
In fact, until November of this year, Ray Dalio said that there were some problems with Bitcoin as a currency. He argued that, in theory, bitcoin could be used as a currency, but it failed in practice because it was too volatile to be a stable store of wealth, and there were too few use cases.
Dario also said that Bitcoin’s lack of government control may hinder its use as a currency. For these reasons, he believes that the digital currency will not be as successful as people would like it to be. In his opinion, if Bitcoin becomes too successful, governments will outlaw it.
On November 18, Wall Street financial analyst and Bitcoin supporter Max Keiser “pushed back” against Dario’s view that Dario must buy Bitcoin as soon as possible if he wants to stay in business, and Keise said that if he doesn’t buy Bitcoin soon, he will go bankrupt within 24 months.
Later, Dario sent out a series of tweets saying, meaning correct him if his previous perception of Bitcoin is wrong.
In the weeks that followed, however, a dramatic scene unfolded.
On December 09, Dario tweeted that bitcoin (and some other digital currencies) have over the last ten years established themselves as interesting gold-like asset alternatives.
Dalio also argues that “with similarities and differences to gold and other limited-supply, mobile (unlike real estate) storeholds of wealth. So it could serve as a diversifier to gold and other such storehold of wealth assets. The main thing is to have some of these types of assets (with limited supply, that are mobile, and that are storeholds of wealth), including stocks, in one’s portfolio and to diversify among them. Not enough people do that.”
“As far [sic] bitcoin relative to gold,” concluded Dalio, “I have a strong preference for holding those things which central banks are going to want to hold and exchange value in when they are trying to transact.”
From strongly opposed, to readily accepted, we have seen a dramatic change in Wall Street institutional investors’ perceptions of Bitcoin on Ray Dalio’s path to Bitcoin recognition. Perhaps we will see more such dramatic reversals in the future.
Article from OKEx Intelligence Bureau
Translated by Yang(Mengyan Finance)