Bitcoin adoption 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 Corona Recession, this dynamic was not given much consideration by investment banks, hedge funds, and asset management titans.
The speed and scale of the rebound in equities and risk assets in March of last year was largely caused by the new strength that retail investors represent in the markets, bolstered by new access to the market. information and markets via online platforms around the world. The recent coordinated targeting of short-rate concentrated stocks by “Reddit revolutionaries” was reminiscent of the Arab Spring, where the use of social media catalyzed regime change.
The r / wallstreetbets group was also well informed and demonstrated its ability to move the markets, triggering a political outcry and temporary concern for the structure of the clearing and settlement structure of the US stock market. Retail investors have now permanently affected the asymmetry of short bets on single-share stocks which force hedge funds and traditional “market-neutral” asset managers to deploy more sophisticated strategies and mechanisms to manage the market. risk.
Why we live in the Bitcoin age
Bitcoin has exploded due to the confluence of a number of factors. It is “better to be gold than gold” since it is instantly accessible (does not require the trust of a middleman, administrator or a vault appointment. ), has a lower carry cost than bullion, and has an absolutely limited supply of $ 21 million (as advancements in refining technology and environmental, social and governance shortcuts can generate more metal).
The rate of change in the balance sheet expansion of the European Central Bank (ECB), the Federal Reserve and other G4 central banks is unprecedented. The “debasement of fiat money” has moved from “crypto kid” language to the language of financial markets, adopted by the world’s greatest strategists to encompass the decline in the purchasing power of money and fuel price inflation. assets throughout the “Everything Rally”. “This specter of erosion of wealth is a familiar dynamic in many emerging markets, of course, since World War II, where investors and savers live with the threat of their wealth disappearing. These conditions are now ripe. in markets developed since the Great Corona 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 banks.
ITI is an emerging, market-driven, multi-asset prime broker. The ITI became bullish on bitcoin in the second quarter of last year when it became evident in our major markets that the impact of retail investors on stock markets was a global phenomenon, rather than something limited. to the US stock market, as has been widely reported. ITI observed that, more and more, the world’s population looked to investing in markets out of desperation for a living, rather than the “home gaming culture” that is often described as fueling bitcoin.
Then, in the third quarter of last year, bitcoin began to wipe out the previous December 2017 peak in the currencies of Brazil, Russia, India, China, and South Africa (BRICS ) and other emerging markets. As US and European-based observers debated “is he, isn’t he? protect their savings.
Another major contributor to the institution’s adoption of bitcoin has been the personal incentive for asset managers, investment governance committees, and corporate CFOs. Remuneration determines behavior in the financial markets. In December 2017, he imposed a stoic fiduciary responsibility to decry crypto as a vehicle for money laundering and nefarious activity. This time around, however, that pendulum has swung to the other side, with professional allocators and wealth managers needing to be able to point to the safest way to access bitcoin for equity investment mandates. and multi-assets.
ITI observes that bitcoin is an extension of the investment phenomenon in emerging markets. It is also a manifestation of the value of the Internet. And therefore, it stands to reason that social media and the cult of fame have also driven demand to an extent often misunderstood by traditional asset managers. In recent years, fame has been king, embodied by the ascendancy of the previous US president.
Bitcoin has become a necessary topic for all those tech-savvy business leaders who have exploited the network effect to spread their followers. Elon Musk’s Tesla announced that he spent $ 1.5 billion on bitcoin in January, which caused the currency’s value to rise 17%. This news came just days after Musk added “#bitcoin” to his Twitter profile page – replacing it with “Dogecoin” shortly thereafter, which increased volatility for several days. Tesla also recognized future plans to accept bitcoin as a means of payment for its products, which, quite significantly, has contributed to the general acceptance of Bitcoin.
The “Celebrity” dynamic
Michael Saylor, CEO of MicroStrategy, is Bitcoin’s most influential American. His company, a two-decade Nasdaq veteran, currently holds the largest corporate bitcoin allocation in the world.
The reason Musk and Saylor have had such an impact on Bitcoin is because of their credentials to back up their justifications and bold positioning. Musk is one of the richest people in the world, which makes him a leading authority in successful endeavors. Its actions not only increased the number of retail investors looking to make short-term fortunes in volatile digital currency, but it made bitcoin a much more attractive option for institutional, institutional and traditional investors, which it would do. less than six months ago. have not gone near Bitcoin.
The difference between Musk’s tongue-in-cheek support for dogecoin and his support for bitcoin is that Tesla put his cash reserves in Bitcoin. And in doing so, Tesla has joined a long list of tech giants who have already embraced cryptocurrency: Mastercard, Home Depot, Wikipedia, and AT&T all accept cryptocurrency as a method of payment, and arguably the trademark of The world’s most recognizable technology, Microsoft, has been accepting Bitcoin for use in its Xbox online store since 2014 (with a short hiatus).
Thus, Tesla’s acceptance of bitcoin gave more weight to the long-term success of bitcoin than any public tweet from Musk. As of this writing, rumors of Apple’s introduction into the cryptocurrency space are growing.
With economic conflicts and the devaluation of fiat currencies caused by quantitative easing by central banks in response to the COVID-19 pandemic, it’s no surprise that retail investors and businesses are rushing to invest in bitcoin. Celebrity assessment of this fact has, for the most part, done little more than attract even more attention to the digital currency.
This is a guest post from Stephen Kelso. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.