TWR — Bitcoin in Uncharted Territory After Smashing Through Previous ATHs
So, where do we go from here?
It’s 9pm on this cold Toronto night and I’m sat here in my office not just digesting the mediocre shawarma that was my dinner, but also the truly epic week that just unfolded. It was a long one to say the least. Totally worth it.
Okay, so let’s start by trying to unpack what the heck just happened. This week started off pretty boring (we’re so quick to get bored, eh?) with Bitcoin trying to push past $19.5k. That was until Wednesday afternoon when Bitcoin blew past the $20k hurdle and it was light air from there.
Powered by immensely bullish news surrounding institutional adoption and a ton of media coverage, $21k was barely a pitstop. Then we proceeded to power all the way through to $23.6k. Reminiscent of December 2017 minus the retail rush.
I mean, it’s kind of hard not to get excited when Bloomberg delays BREAKING NEWS from the Fed (who underscored their dovish stance — a.k.a. the money printer is about to go brrr) to have the CIO $230B AUM Guggenheim explain their call for $400k BTC. Amazing.
What we saw at the desk
The week started off normally busy with new clients who onboarded over the weekend submitting buy orders mixed in with regulars at the desk adding to their positions — little on the sell-side. Then Wednesday happened and it seemed to catch everyone by surprise. Our phone lines were jammed but it seemed like everyone was waiting to see what was going to happen next… Well, we already know what happened next and it led to a flurry of activity — mostly on the buy-side from clients who were waiting for lower prices but decided the wait was over. Along with trading activity came an influx of new account registrations from referrals and organically — mostly net new sophisticated investors who heard about us through the grapevine.
Surprisingly, some clients who bought their first bitcoins over the past few months felt comfortable with their position as the price was running. Meanwhile, I was biting the inside of my cheeks, anxious with severe FOMO that I didn’t have enough! Okay, that was overkill and possibly a little bit too graphic but my point is that once you truly understand Bitcoin you will never feel like you have enough.
Not only is Bitcoin the most verifiably scarce asset on the planet, but it’s also the best performing asset by a very wide margin over the past decade.
With a macroeconomic backdrop consisting of unprecedented fiscal stimulus, government intervention, and low interest rates, the case for Bitcoin couldn’t be stronger and the institutional players are starting to pay attention.
Death, taxes, and 21,000,000 Bitcoin — Bitcoin’s supply crisis
As the majority of our readers already know, Bitcoin’s monetary policy is programmed to be deflationary over time. With wide scale adoption, that leads to higher purchasing power and supply scarcity.
Just late October PayPal opened its doors for their 300+ million users to buy Bitcoin. Now, PayPal alone is buying up 100% of newly-issued Bitcoin.
Square’s CashApp which until PayPal was doing the majority of the heavy purchasing generated more than $1.63 billion in bitcoin revenue in Q3, which is an increase of more than 1,000% over the same period last year. To put this in perspective, Square counts the total sale amount of bitcoin to their customers as bitcoin revenue. That is a lot of corn.
As the fintech giants are doing their job acting as a constant for high volume purchasing we’re seeing record institutional demand.
After life insurance giant MassMutal announced last week that it had purchased $100 million in Bitcoin, JPMorgan chimed in on what it meant for Bitcoin.
“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.”
JPMorgan commented early this week that if pension funds and insurance companies in the U.S., euro area, U.K. and Japan allocate just 1% of assets to Bitcoin, it would result in additional Bitcoin demand of $600 billion.
The Grayscale Bitcoin Trust has been used as a vehicle for institutional money to get exposure to the asset class. Just the other week, Guggenheim reserved the right to invest $530 million into Bitcoin through GBTC.
Grayscale AUM on Nov 1: $7.6 billion | Grayscale AUM today: $13.0 billion
Ruffer Investment Company sent a short update to shareholders Tuesday notifying them of the company’s November allocation to bitcoin. They allocated approximately 2.5% of their $27 billion AUM to bitcoin. The investment is currently worth over $740 million. Mind blowing.
“We see this [bitcoin investment] as a small but potent insurance policy against the continuing devaluation of the world’s major currencies”
Institutional bitcoin firm One River Digital has already invested $600 million in Bitcoin and Ether for its institutional clients. They announced this Wednesday that legendary billionaire hedge fund manager Alan Howard took an ownership stake and CEO Eric Peters says that the firm has commitments that will bring its crypto holdings passed $1 billion in early 2021.
MicroStrategy was back making noise in the Bitcoin world late last week when they announced last Friday that they had raised $650 million via a senior convertible note offering as part of its push for more dry powder with which to buy bitcoin. The move follows MicroStrategy’s $50 million purchase of bitcoin, with its currently known holdings now above 40,000 BTC.
For every company that announces their Bitcoin purchases, there are presumably hundreds quietly building their positions. I mean, why wouldn’t you announce a massive Bitcoin purchase? Now that nearly every type of institution has taken the dive it isn’t so brave. So, as game theory would suggest, make your purchase, announce it, and open up the doors for other big money laggards and retail to pile in with newfound confidence and watch the numbers go up. It is no longer a race to second but a race to place yourself among the early cohort of innovative thinkers that will reap the rewards for years to come.
No matter if you’re an institution or an average Joe — everyone gets Bitcoin at the price they deserve.
In case you missed it…
- Coinbase files for IPO https://www.cnbc.com/2020/12/17/largest-us-cryptocurrency-exchange-coinbase-files-for-ipo-as-bitcoin-soars-past-23000.html
- Ruffer Investment Confirms Massive Bitcoin Buy of $744M https://www.nasdaq.com/articles/ruffer-investment-allocated-2.5-of-more-than-%2420b-portfolio-to-bitcoin-in-november-2020-12
- MicroStrategy Completes $650 Million Offering https://www.microstrategy.com/en/company/company-videos/microstrategy-completes-650-million-offering-of-convertible-senior-notes
- https://www.bloomberg.com/news/articles/2020-12-14/jpmorgan-says-massmutual-s-bitcoin-foray-signals-widening-demand
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Satstreet serves private Canadian clients including some of the largest Bitcoin mining operations, institutions, and high net worth individuals. Satstreet has raised initial funding from Round13 Capital and several prominent investors.
