Listen to the recorded interview here.
Question 1: Bitcoin has broken its previous all-time high and has rocketed beyond US$22,000. What do you think are the reasons behind this?
On 16 December, the Fed signalled it will continue the $120 billion of debt purchases per month and maintain interest rate close to zero, meaning they will continue to print money to save the economy. The market expects that US dollar will be negatively impacted might see devaluation. Bitcoin has really emerged as a safe-have asset, even outperforming gold.
And it’s not just retail allocating more cash to bitcoin, it’s the institutional investors as well. British investment management firm Ruffer, listed on London Stock Exchange, with over $27 billion under management, has confirmed that its bitcoin investment now totals $750 million. The firm holds about 37,500 BTC, which is roughly 2.7% of its total asset under management (AUM).
Insurance giant Massachusetts Mutual recently unveiled a $100 million investment in Bitcoin for its general investment account. The company purchased an estimated 5470 Bitcoin at the average price of US$18,279 through the New York Digital Investment Group (NYDIG) and took a $5 million minority equity stake in the fund management outfit.
At the same time, while the investment community is growing, so does the infrastructure around Bitcoin. S&P Dow Jones Indices, a division of financial data provider S&P Global Inc, said that it will launch cryptocurrency indices in 2021. CBOE plans to launch cryptocurrency indices in Q2 2021. CME Group to Launch Ether Futures on February 8, 2021 Standard Chartered’s fintech investment unit, SC Ventures, and Northern Trust will launch a U.K.-based cryptocurrency custodian, called Zodai, for institutional clients in 2021.
The crypto market is sensitive to industry news and all these developments together have been driving up the price of Bitcoin,
Question 2: What do you think about the current bull run, is Bitcoin overvalued now?
Bitcoin is still in the initial stage of moving upward as there are still a number of institutional investors who have not yet entered the crypto market. From a technical analysis standpoint, we might find a lot of resistance at $30,000, and support above $17,000, but the overall outlook is bullish.
According to JPMorgan, the Grayscale Bitcoin Trust, a listed security popular with institutions, has seen inflows of almost $2 billion since October, compared with outflows of $7 billion for exchange-traded funds backed by gold. Bitcoin only accounts for 0.18% of family office assets, compared with 3.3% for gold ETFs. Tilting the needle from gold to bitcoin even slightly by more institutional investors would represent the transfer of billions in cash.We are quite optimistic about Bitcoin in 2021.
Question 3: What do you think about the recent moves by institutional investors into Bitcoin? Does their participation change the market?
Institutional investors have prepared quite some time before officially entering the crypto market. For them to enter now is a very good sign and an important step forward, also in the mind of retail investors who might have been in the space for years. Their participation stimulates other institutional investors to join the game, which means more capital will enter the market, we might see more price appreciation as scarcity ensues, and we will see more regulation come into force. All in all, despite potential growing pains ahead, we see the institutional turn as a step forward.