Bitcoin adoption is accelerating at an unprecedented pace. Bitcoin is the world’s first investment megatrend in which private investors have led institutional allocators. And until the advent of the Great Corona Recession, not much attention was paid to those dynamics by the investment banks, hedge funds and wealth management titans.
The speed and magnitude of the rally in equities and risk assets in March last year was largely driven by the new strength that retail investors represent in markets, enabled by new access to information and markets through online platforms around the world. The recent concerted approach to concentrated short-rate stocks by the “Reddit Revolutionaries” was reminiscent of the Arab Spring, where the use of social media was a catalyst for regime change.
The r / wallstreetbets group was also knowledgeable and showed its ability to move markets, causing political turmoil and temporary concern about the clearing and settlement structure of the US stock market. Retail investors have now permanently impacted the asymmetry of single-share short bets, which require traditional ‘market neutral’ hedge funds and asset managers to deploy more sophisticated risk management strategies and mechanisms.
Why we live in the Bitcoin era
Bitcoin has exploded due to the confluence of a number of factors. It is ‘better gold than gold’ insofar as it is readily accessible (requires no trust in an intermediary, administrator or vault appointment), has lower transportation costs than precious metals and an absolutely limited supply of 21 million (while advances in refining technology and shortcuts can generate more metal in the field of the environment, society and government).
The pace of change in the balance sheet expansion at the European Central Bank (ECB), the Federal Reserve and other G4 central banks is unprecedented. The “cut in fiat currency” has morphed from a “crypto kid” language to capital market language, adopted by the world’s leading strategists to include the decline in the purchasing power of money and asset price inflation during the period. “Everything Rally”. “This specter of wealth erosion has, of course, been a well-known dynamic in many emerging markets since World War II, where investors and savers lived with the threat of their wealth disappearing. where policymakers can use the tools that have already been developed and tested since the Great Financial Crisis – and without having to debate the political moral danger of seeing banks bailed out.
ITI is an emerging, market-oriented multi-asset prime broker. ITI became bullish on bitcoin in the second quarter of last year when it became apparent in our core markets that the impact of private investors on the stock markets was a global phenomenon, rather than something limited to the US stock market, as is widely reported. ITI noted that the world’s population has increasingly turned to investing in markets in desperation to make a living, rather than the “work-from-home gambling culture” often portrayed as fuel for bitcoin.
Then, in the third quarter of last year, bitcoin started to take its previous December 2017 peak in the currencies of Brazil, Russia, India, China and South Africa (BRICS) and other emerging markets. While US-based and European observers debated the question “will it, won’t it” break $ 20,000, ITI noted that for hundreds of millions of people around the world, bitcoin had already hit a new high in their currency when they scrambled to protect their savings.
Another major contributor to the adoption of bitcoin by the establishment is the personal incentive for asset managers, investment management committees and corporate CFOs. Compensation determines behavior in financial markets. In December 2017, it created stoic fiduciary responsibility to dismiss crypto as the vector of money laundering and nefarious activity. This time, however, that pendulum has turned in the other direction, requiring professional allocators and asset managers to point out the safest way to access bitcoin for equity and multi-asset investment mandates.
ITI observes that bitcoin is an extension of the emerging markets investment phenomenon. It is also an expression of the value of the Internet. And so it makes sense that social media and the celebrity cult have also spurred demand to an extent often misunderstood by traditional wealth managers. In recent years, celebrity was king, epitomized by the predominance of the previous US president.
Bitcoin has become a necessary topic for all those tech-savvy business leaders who have used the network effect to spread their followers. Elon Musk’s Tesla announced it had spent $ 1.5 billion on bitcoin in January, pushing the currency up 17 percent in value. This news came just days after Musk added ‘#bitcoin’ to his Twitter profile page – only to replace it with ‘Dogecoin’ shortly after, which increased volatility for several days. Tesla also recognized future plans to accept bitcoin as payment for its products, which has contributed quite significantly to Bitcoin’s widespread adoption.
The dynamics of ‘celebrities’
Michael Saylor, the CEO of MicroStrategy, is the most influential American in Bitcoin. His company, a 20-year veteran of the Nasdaq, currently has the largest corporate allocation to bitcoin in the world.
The reason Musk and Saylor have had such an impact on Bitcoin is because of their credentials to support their rationale and bold positioning. Musk is one of the world’s richest people, making him a leading authority on successful endeavors. His actions have not only increased the number of private investors looking to make a fortune in the short term from the volatile digital currency, but it has made bitcoin a much more attractive option for corporate, institutional and traditional investors alike, which would be less than six months ago. . have not come close to bitcoin.
The difference between Musk’s ironic support for dogecoin and his support for bitcoin is that Tesla has put its treasury reserves into bitcoin. And with that, Tesla joined a long list of tech giants who have already embraced cryptocurrency: Mastercard, Home Depot, Wikipedia and AT&T all accept cryptocurrency as a form of payment, and arguably the most recognizable tech brand in the world, Microsoft. , has been accepting bitcoin for use on its Xbox online store since 2014 (with a short pause).
Thus, Tesla’s adoption of bitcoin has given more weight to bitcoin’s long-term success than any public tweet from Musk. At the time of writing, rumors of Apple’s introduction to the cryptocurrency space are gaining momentum.
With the economic strife and devaluation of fiat currencies triggered by quantitative easing by central banks in response to the COVID-19 pandemic, it is no surprise at all that private and corporate investors alike are rushing to invest in bitcoin. For the most part, the celebrity assessment of this fact has done little more than draw even more attention to the digital currency.
This is a guest post from Stephen Kelso. The views expressed are their own views and do not necessarily reflect those of BTC Inc or Bitcoin Magazine