2020 was unforgettable, especially for Bitcoin. To help rethink this year for our readers, we asked our network of contributors to think about Bitcoin’s price action, tech development, community growth, and more in 2020, as well as what all this could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories from our End of Year series 2020.
In previous years, traditional investors and companies were averse to opening their arms (and wallets) to bitcoin. For many it had too many unknowns, too many risks and too much baggage. Not to mention the mountains of hit pieces prepared by mainstream media outlets mocking Bitcoin for a myriad of reasons: Bitcoin is just a ponzi scheme backed by absolutely nothing, they said. Bitcoin will be banned. It’s for criminals. Bitcoin is too volatile to be a good store of value. It’s just being copied by someone else. Even legendary investor Warren Buffet threw in his hat and said Bitcoin “probably rat poison squaredAt Berkshire Hathaway’s 2018 Annual Shareholders Meeting.
But not only has bitcoin not dropped to zero in 2020. This year has been marked by the adoption of bitcoin by renowned investors, hedge funds, financial institutions and companies.
Any of the above stories Declare Bitcoin dead keep falling over again and again. The more time you spend researching and learning about each of these alleged Bitcoin flaws, the more obvious it becomes that they are baseless. 2020 proved that times have certainly changed.
The risks associated with allocating to bitcoin are now reversed. It is now more risky not to own bitcoin and with each passing day, seemingly more and more acclaimed investors, companies and institutions have decided to put their toes in the water by taking a position in bitcoin. Let’s take a look at some of the most notable recent examples.
What do Paul Tudor Jones, Stanley Druckenmiller and Bill Miller have in common? They are all part of the growing list of prolific investors who are bullish about bitcoin. Let’s see what some of them have to say about it.
Paul Tudor Jones
In a letter addressing investors, Jones gave readers a foreword by outlining the tremendous money pressures that have occurred so far in 2020.
“We are witnessing the great monetary inflation, an unprecedented expansion of any form of money unlike anything the developed world has ever seen.”
In its full letter, legible hereJones explained how he expects large amounts of capital to flow into safe assets to avoid this inflation. Bitcoin’s hard-capped, finite supply means that it has extreme scarcity built in. It can provide an inflation-proof hedge against monetary and fiscal irresponsibility from central banks and governments.
“The best strategy to maximize profit is to own the fastest horse. If I am forced to predict my bet is it will be Bitcoin. “
Paul Tudor Jones
The “bitcoin is digital gold” story has gotten another convert. Druckenmiller is the latest high net worth investor to come out as a Bitcoin believer.
Druckenmiller attributed this conversion to a similar investment thesis to Jones. He sees a bearish dollar scenario lined up for the next five to six years due to massive stimulus measures from the Federal Reserve and Congress.
“Bitcoin could be an asset class that has great appeal as a store of value,” Druckenmiller said in an interview at CNBC.
“I own much, much more gold than I own bitcoin. But honestly, if the gold bet works, the bitcoin bet will likely work better because it’s thinner, more illiquid, and a lot more beta. “- Stanley Druckenmiller
Bill Miller previously managed the Legg Mason Capital Management Value Trust Fund and owned beat the S&P 500 for 15 years. He has also recently emerged as a bitcoin bull.
With a similar sentiment to that of Druckenmiller and Jones, Miller has stated that the Federal Reserve is “shooting the money supply” in its reasoning for being on bitcoin for a long time. It appears to be a continuing trend for the outspoken converts of 2020. Unprecedented money pressures are expected to trigger inflation, and the hardest assets to benefit the most.
“The Bitcoin story is very simple. It is supply and demand. Bitcoin supply is growing at about 2.5 percent per year and demand is growing faster than that. “- Bill Miller
In 2020, Bitcoin became the elephant in the boardroom. In some cases, bitcoin is even held by several listed companies as a “treasury reserve”. The spreadsheet BitcoinTreasuries.org lists the companies that have started allocating bitcoin.
The most important company on this list is arguably the financial services and payments company Square, with founder and CEO Jack Dorsey claim that Bitcoin is an “tool of economic empowerment, providing the world with a way to participate in a global monetary system.”
While Square’s sentiment may sound optimistic, it was still dwarfed by business intelligence firm Microstrategy’s move in August 2020 to put a whopping $ 425 million (85 percent of its treasury) into bitcoin. Microstrategy followed by make a statement:
“Bitcoin is digital gold – harder, stronger, faster and smarter than any money that came before it. We expect its value to increase with technological advancements, increasing adoption and the network effect that has fueled the rise of so many category killers in the modern era. – Michael Saylor, CEO of Microstrategy
Looking forward to a very uncertain future, where loose monetary and fiscal policies seem to be the norm, it wouldn’t be surprising to see this becoming a trend. More companies will look for an inflation hedge to protect their capital in an era of massive monetary inflation.
In October 2020, online payment giant PayPal has announced that it would allow its 346 million users to buy, hold and sell bitcoin on its platform. After initially planning to go live in 2021, PayPal has increased the launch date. It launched its bitcoin offering on October 21 and is already seeing significant demand.
While PayPal joined the party in 2020, it isn’t the only financial institution offering bitcoin to its users. Square’s Cash app currently sells twice as much bitcoin than what is currently being produced by miners (with nearly three times the users, PayPal is likely to eat up BTC stock at an astonishing rate). And Grayscale has been a colossus when it comes to gobbling up the newly minted bitcoin stash, doubling its bitcoin holdings since the third quarter of 2019.
What about the banks?
None of the information touches the largest financial institution: the banks. Rest assured, traditional financial institutions are expected to be involved soon enough.
The Office of the Comptroller of the Currency (OCC), a US banking regulator, recently clarified the regulations that could allow banks to switch in immediately if they want to.
“From safes to virtual safes, we need to ensure that banks can meet the financial services needs of their customers,” said a OCC announcement as of July 2020. “This advisory clarifies that banks can continue to meet their customers’ needs to protect their most valuable assets, which today include cryptocurrency for tens of millions of Americans.”
What the 2020 derisking means for 2021
All of these recent events can help provide coverage for money managers looking to get involved with bitcoin. Publicly traded companies, major institutions and big money investors getting involved in the game in 2020 will help remove the career risk associated with bitcoin that has been saturated in recent years.
Bitcoin is no longer contrarian. In fact, it will become the consensus from 2020. It is becoming less difficult to gain exposure to the new asset class. At the end of the day, it can completely reverse Bitcoin’s risk profile. If these established and respected names are now involved and you are not, then you may come to believe that it is riskier not to have any bitcoin exposure than to have just some.
This is a guest post from Nick Ward. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.