The adoption of bitcoin is accelerating at an unprecedented rate. Bitcoin is the world’s first investment megatrend in which retail investors have led institutional allocators. And, until the advent of the Great Crown Recession, investment banks, hedge funds, and asset management titans gave that dynamic little consideration.
The speed and magnitude of the rebound in stocks and risk assets in March last year was due in large part to the new force that retail investors represent in the markets, empowered by new access to information and markets through of online platforms around the world. The recent coordinated targeting of concentrated short-term actions by “Reddit revolutionaries” is reminiscent of the Arab Spring, where the use of social media catalyzed regime change.
The r / wallstreetbets group was equally knowledgeable and demonstrated its ability to move the markets, sparking a political scandal and temporary concern over the clearing and settlement structure of the US stock market. Retail investors have now taken a hit. permanent asymmetry of short bets on single stocks that require traditional “market neutral” hedge funds and asset managers to implement more sophisticated strategies and mechanisms to manage risk.
Why we live in the era of Bitcoin
Bitcoin has exploded due to the confluence of various factors. It is “better at being gold than gold” insofar as it is instantly accessible (does not require trust in a broker, manager or vault appointment), has a lower cost of transport than bullion, and has an absolutely limited supply of 21 million (while advances in refining technology and environmental, social and governance shortcuts may generate more metal).
The rate of change in balance sheet expansion at the European Central Bank (ECB), Federal Reserve and other G4 central banks is unprecedented. The “debasement of fiat currency” has gone from being a language of “crypto children” to a language of capital markets, adopted by the world’s leading strategists to encompass the decline in the purchasing power of money and fuel inflation of dollars. Asset prices at the “Everything Rally”. “This specter of wealth erosion has been a familiar dynamic in many emerging markets, of course, since World War II, where investors and savers have lived with the threat of their wealth disappearing. These conditions have now reached the bottom. markets developed since the Great Crown Recession, where policymakers can take advantage of tools already developed and tested since the Great Financial Crisis, and without having to debate the political moral hazard of being seen to bail out the banks .
ITI is an emerging, markets-focused, multi-asset premier broker. ITI turned bullish on bitcoin in the second quarter of last year when it became clear in our core markets that the impact of retail investors on the stock markets was a global phenomenon, rather than something limited to the US stock market. USA, as widely reported. ITI observed that, increasingly, the world’s population was turning to investing in markets desperate to make a living, rather than the “work-from-home gaming culture” often described as bitcoin fuel.
Then, in the third quarter of last year, bitcoin began to exceed the previous peak of December 2017 in the currencies of Brazil, Russia, India, China and South Africa (BRICS) and other emerging markets. While European and American observers debated the question of “will it, will it not?” Breaking the $ 20,000, ITI observed that for hundreds of millions of people around the world, bitcoin had already hit a new high in their currencies as they scrambled to protect their savings.
Another major contributor to the establishment’s adoption of bitcoin has been personal incentive for asset managers, investment governance committees, and corporate CFOs. Compensation drives behavior in financial markets. In December 2017, it generated a stoic fiduciary liability to denounce cryptocurrencies as the vector of money laundering and nefarious activity. This time, however, that pendulum has swung the other way, so professional allocators and wealth managers should be able to point out the safest way to access bitcoin for multiple asset and equity investment mandates.
ITI observes that bitcoin is an extension of the emerging markets investment phenomenon. It is also a manifestation of the value of the Internet. And so it stands to reason that social media and the cult of celebrity have also driven demand to a degree that traditional asset managers often misunderstand. In recent years, celebrity has been king, personified by the ancestry of the former president of the United States.
Bitcoin has become a necessary topic for all those tech-savvy business leaders who have taken advantage of the network effect to spread their followers. Elon Musk’s Tesla announced that he had spent $ 1.5 billion on bitcoin in January, causing the coin to rise 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, increasing volatility for several days. Tesla also acknowledged future plans to accept bitcoin as payment for its products, which, quite significantly, has contributed to the widespread acceptance of Bitcoin.
The “celebrity” dynamic
Michael Saylor, CEO of MicroStrategy, is the most influential American on Bitcoin. His company, a two-decade veteran of the Nasdaq, currently has the largest corporate allocation to bitcoin in the world.
The reason Musk and Saylor have made such an impact on Bitcoin is because of their credentials to support its fundamentals and bold positioning. Musk is one of the richest people in the world, making him a leading authority on successful initiatives. His actions have not only increased the number of retail investors looking to make a short-term fortune from the volatile digital currency, but they have made bitcoin a much more attractive option for corporate, institutional and traditional investors, making less than six months would. have not come close to bitcoin.
The difference between Musk’s ironic support for dogecoin and his support for bitcoin is that Tesla put its cash reserves in bitcoin. And in doing so, Tesla joined a long list of tech giants who have already embraced cryptocurrency: Mastercard, Home Depot, Wikipedia, and AT&T accept cryptocurrency as a form of payment, and possibly the world’s most recognized tech brand, Microsoft, has been accepting bitcoin for use on its Xbox online store since 2014 (with a brief hiatus).
Thus, the acceptance of Bitcoin by Tesla gave more weight to the long-term success of Bitcoin than any public tweet from Musk. At the time of writing, rumors about Apple’s introduction to the cryptocurrency space are gaining momentum.
With the economic struggle and the devaluation of fiat currencies caused by quantitative easing of central banks in response to the COVID-19 pandemic, it is not at all surprising that retail and corporate investors are rushing to invest in bitcoin. The valuation of this fact by celebrities, for the most part, has done little more than draw even more attention to the digital currency.
This is a guest post by Stephen Kelso. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.