The adoption of bitcoin is accelerating at an unprecedented rate. Bitcoin is the first investment megatend in the world in which retail investors have led institutional allocators. And until the onset of the Great Crown Recession, that dynamic was not taken into account by investment banks, hedge funds and asset management titans.
The speed and magnitude of the rebound in equities and risk assets in March last year was largely driven by the new strength of retail investors in the markets, driven by new access to information and markets through online platforms across the country. world. The recent coordinated targeting of short-term concentrated stocks by the “Reddit Revolutionaries” is reminiscent of the Arab Spring, where the use of social media catalyzed regime change.
The r / wallstreetbets group was equally well informed and demonstrated its ability to move markets, sparking political unrest and a temporary concern for the structure of the US capital market clearing and settlement structure. Retail investors have been increasingly affected by the asymmetry of short bets in single-share stocks, which require traditional “market-neutral” hedge funds and asset managers to implement more sophisticated risk management strategies and mechanisms.
Why we live in the Bitcoin age
Bitcoin has exploded due to the confluence of several factors. It is “better to be gold than gold” insofar as it is instantly accessible (does not require trust in an intermediary, administrator or safe deposit box), has a lower transport cost than bullion and has an absolutely constrained offer of 21 millions (as advances in refining technology and environmental, social and governance shortcuts can generate more metal).
The rate of change in the expansion of the balance sheet at the European Central Bank (ECB), the Federal Reserve and other G4 central banks is unprecedented. The “deterioration of the fiat currency” has gone from being the language of “crypto kid” to the language of capital markets, adopted by the world’s leading strategies to include the decline in the purchasing power of money and fueling asset price inflation in the “Rally everything. “This spectrum of wealth erosion has been a familiar dynamic in many emerging markets, of course, since World War II, where investors and economists have lived with the threat of the disappearance of their wealth. These conditions have now reached the developed markets since the Great Crown Recession, where policymakers can use the tools already developed and tested since the Great Financial Crisis – and without having to debate the political moral danger of being seen rescuing banks. .
ITI is a leading, market-oriented multi-asset broker. ITI became optimistic about bitcoin in the second quarter of last year, when it became apparent 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 capital market, so as widely reported. ITI has noticed that, increasingly, the global population is turning to investing in desperate markets to generate a living, rather than the “home gambling culture” that is often described as fueling bitcoin.
Then, in the third quarter of last year, bitcoin began to break the previous peak in December 2017 in the currencies of Brazil, Russia, India, China and South Africa (BRICS) and other emerging markets. As European and US-based observers debated the “will, no” issue of breaking $ 20,000, ITI noted that for hundreds of millions of people around the world, bitcoin has already hit a new high in their currencies over time. hurry to protect their savings.
Another major contributor to the institution’s adoption of bitcoin has been personal stimulation for asset managers, investment governance committees and corporate CFOs. Compensation determines behavior in financial markets. In December 2017, the Stoic fiduciary liability determined the cryptocurrency as a vector of money laundering and harmful activity. This time, however, that pendulum has swung to the other side, whereby professional allocators and wealth managers must be able to point out the safest way to access bitcoin for equity and multi-asset investment mandates.
ITI notes that bitcoin It is an expansion of the investment phenomenon in emerging markets. It is also a manifestation of the value of the internet. Therefore, it is clear that social networks and the cult of celebrities have also led to demand that is often misunderstood by traditional asset managers. In recent years, the celebrity has been king, symbolized by the ancestry of the former American president.
Bitcoin has become a necessary topic for all those business leaders skilled in technology who have capitalized on the effect of the network to propagate their pursuits. Elon Musk’s Tesla announced that it spent $ 1.5 billion on bitcoin in January, causing the currency to grow by 17%. The news came just days after Musk added “#bitcoin” to his Twitter profile page – only to replace it with “Dogecoin” shortly thereafter, which increased volatility for several days. Tesla also acknowledged future plans to accept Bitcoin as payment for its products, which, quite significantly, contributed to the general acceptance of Bitcoin.
Celebrity Dynamics
Michael Saylor, CEO of MicroStrategy, is the most influential American in Bitcoin. His company, a two-decade veteran of the Nasdaq, currently holds the largest corporate bitcoin allocation in the world.
The reason why Musk and Saylor had such an impact on Bitcoin is due to their accreditation to support their rationality and bold positioning. Musk is one of the richest people in the world, making him a leading authority in successful endeavors. Its actions have not only increased the number of retail investors who want to make a short-term fortune in volatile digital currency, but made bitcoin a much more attractive option for both corporate, institutional and traditional investors. less than six months ago they would not have come close to bitcoin.
The difference between Musk’s dogecoin support and his support for bitcoin is that Tesla has put its treasury reserves in bitcoin. And in doing so, Tesla has joined a long list of technology giants that have already embraced cryptocurrency: Mastercard, Home Depot, Wikipedia and AT&T accept all cryptocurrencies as a form of payment and arguably the most recognized technology brand in the world. Microsoft has been accepting bitcoin for use in its 2014 Xbox online store (with a short break).
Thus, Tesla’s acceptance of bitcoin has given more weight to bitcoin’s long-term success than any public tweet from Musk could. At the time of writing, rumors of Apple’s introduction into cryptocurrencies are gaining momentum.
With the economic conflict and the devaluation of fiat currencies caused by the quantitative easing of central banks in response to the COVID-19 pandemic, it is not at all surprising that both retail and corporate investors are rushing to invest in bitcoin. Assessing the celebrity of this fact has, for the most part, done little more than draw even more attention to the digital currency.
This is a guest post by Stephen Kelso. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.