Slowly but surely Bitcoin is making its way to $20,000. Soon it will become very hard - and costly - to ignore it.
We are at the start of a new hype cycle which is bringing up new converts and reviving old critics.
One thing is sure, Bitcoin is not dead.
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Good PR
This is becoming a well documented pattern. First they ignore it, then they call it a scam, then they adopt it.
Remember JPMorgan, Fidelity… Now you can add PayPal to the list.
After being hostile to crypto related transactions for years and having Bill Harris (former CEO) denounce Bitcoin as a scam they are now entering the game.
Don’t get too excited about that though. What they are offering is pretty limited.
If you buy Bitcoin with PayPal it is bound to your account. You can’t get the private keys and you cannot transfer it out of PayPal.
For a company that is known to freeze accounts for obscure reasons with little to no recourse you can imagine that it does not inspire much confidence.
Of course this is a net positive for Bitcoin. The announcement itself is good PR and it will give potential exposure to the 346 million PayPal accounts worldwide.
But the most interesting aspect of it is that PayPal feels like they can no longer ignore Bitcoin.
One more step on the road to global adoption.
Paul Tudor Jones strikes again
In case you had some doubts PTJ is still pushing the Bitcoin trade.
In a recent interview on CNBC he confirmed that in his mind long Bitcoin is THE great inflation hedge trade of the coming years.
As far as we know Paul Tudor Jones is not irresponsibly long Bitcoin. But we have already discussed that with a single digits percentage allocation you can still get a very nice upside with very low risk.
Such is the nature of asymmetric bets.
As an interesting comment PTJ also compared investing in Bitcoin to being an early investor in Apple or Google.
In that case I think he was mostly talking about the human capital behind the Bitcoin network. But we can push the comparison further.
Apple has been there for a long time now so when you plot the growth trajectory of Apple, Google and Bitcoin some nice patterns emerge:
All three are growing exponentially.
Apple starts picking up pace at the same time as the internet is touching more and more people.
Naturally Google business is directly correlated to the growth of the internet usage.
Remember that in 2005 only about 15% of the world population had access to the internet. Fast forward now and about 59% of the world population is using the internet.
Clearly Apple and Google are benefiting from that.
But Bitcoin as an internet native currency is poised to benefit even more. As digital money Bitcoin can potentially reach 4.6 billion internet users.
When you compare that to the estimated 200 million current Bitcoin users the room for growth is massive.
What year is this?
Here is an extract from a Bloomberg article on the “resurgence of Bitcoin”:
“But for all the hype, there’s little evidence that Bitcoin and its digital brethren are any closer to displacing fiat currencies. The use case -- what you can actually buy with Bitcoin -- remains flimsy. Instead, some critics argue, digital tokens have simply morphed into another asset class, similar to gold, and the sheen of institutional acceptance is simply proof that financial firms want to get in on the market for trading cryptocurrencies.”
Let me get that straight? Is the issue that Bitcoin is only now becoming a serious competitor to gold?
The main critic of the article seems to be that Bitcoin hasn’t yet replaced fiat currencies altogether while being around for 11 years.
In a few years we went from Bitcoin is worthless to Bitcoin is a scam and now Bitcoin is only digital gold…
“CoinShares sees significant interest from traditional multi-asset fund managers, but larger ones are reluctant to be first in the space and say they prefer the safety of the herd, [Meltem Demirors] said. Institutions might start paying more attention should an ETF be approved, for instance.”
… and the other problem is that the largest fund managers haven’t bought yet because they don’t want to risk being first.
Well it only takes one to be first. The day will come when a major traditional multi-asset fund manager will take a position and the others will follow. It is just a matter of time.
In the meantime anyone else is free to front run the big money. Nobody is going to complain about that.
Institutional interest
There might be a lack of large institutional players allocating a fraction of their portfolio to Bitcoin.
But when you look at the latest quarterly report from Grayscale there is no lack of institutional interest overall.
According to the latest Grayscale quarterly report most of the inflow comes from institutional investors. Those institutional investors are in their vast majority hedge funds. But it always starts there.
This is not a surprise.
Individual investors, family offices and small hedge funds have a shorter decision chain, lower regulatory burden and a higher likelihood to look at exotic asset classes.
What the data shows is that we are still in the early phase of adoption:
Individual investors.
Small hedge funds and family offices.
Publicly traded companies and larger hedge funds (we are here).
Large companies and mutual funds.
Central banks???
That’s it for today. If you have learned something please subscribe and share to help the newsletter grow.
Cheers,
Nick
The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:
Click on the subscribe button right below.
Follow Ecoinometrics on Twitter at https://twitter.com/ecoinometrics.
Done? That’s great! Thank you and enjoy.