Bitcoin is often referred to as the “digital gold” of the 21st century. Is this cryptocurrency reliable as a new haven against financial uncertainty and inflation? This question is difficult to answer, but the actions of many large institutions and the views of some well-known investment managers show that Bitcoin (BTC) is becoming increasingly attractive as a means of hedging these concerns.
Business analytics firm MicroStrategy has poured institutional spending into Bitcoin for the past six months, purchasing more than $1 billion in BTC after introducing cryptocurrency as a major part of its treasury reserve. The company now holds approximately 70,784 BTC.
Michael Saylor, CEO of MicroStrategy, has made it very clear that superior cryptocurrency is a more valuable store of value than fiat currency, and he has been using his bitcoin since August 2020.
At the same time, Grayscale Investments has cleaned up Bitcoin in recent months and firmly established itself as the world’s largest digital asset manager. According to the company’s latest data, Grayscale’s Bitcoin holdings at around 648,000 BTC, valued at more than $20 billion, are a major contributor to the overall portfolio.
SkyBridge Capital followed in the footsteps of these well-known Bitcoin pioneers and set up its Bitcoin fund in December 2020. Skybridge was founded by American financier and former White House communications director Anthony Scaramucci, who made some very optimistic statements about the future of Bitcoin as a safe currency. Safe-haven assets.
Scaramucci and SkyBridge manager Brett Messing wrote a CNN column portraying BTC as an increasingly attractive option for long-term investors looking to avoid inflation. The two said that financial institutions that have strengthened oversight, improved infrastructure, and created cryptocurrency risk, “have made bitcoin investments as safe as owning commodities like bonds and gold, and gold is also used to balance investment portfolios”.
With BTC, Ether (ETH) and other altcoins hitting record highs in the past two months, Bitcoin and the wider cryptocurrency space have once again been pushed into mainstream consciousness. It remains to be seen whether Bitcoin will become less volatile and fulfil Scaramucci, Saylor, and others’ hopes of turning cryptocurrencies into a new kind of haven.
It is widely believed that the current boom in cryptocurrency is fundamentally different from the previous period of significant growth. Due to institutional interest, the cryptocurrency appears to be becoming a better-known investment for individuals and institutions.
Pavel Matveev, CEO of cryptocurrency payment company Wirex, told Cointelegraph that the perception of bitcoin could change, although bitcoin is still known for extreme price volatility.
Matveev stated that the price of Bitcoin is still three times more volatile than the S&P 500 index, and recent changes in hay prices are due to macroeconomic factors like the COVID-19 pandemic and the government’s fiscal measures to address this situation due to:
“The most volatile drivers of the BTC price have been its limited supply and its booming demand from institution-grade investors. That being said, the QE measures and the low to negative rates environment did increase liquidity to historical levels. Naturally, the choice for a company to allocate a small portion of treasury funds in a rallying Bitcoin when the value of the Greenback is collapsing is natural.”
For many people, a related question is whether Bitcoin and other cryptocurrencies (like Ethereum) are becoming more trustworthy and long-term investments in the face of ongoing economic uncertainty. Matveev pointed out that institutions, which are generally long-term owners, make wise decisions when looking to invest in BTC.
The good record of Bitcoin’s long-term appreciation has sparked an institutional interest. Matveev also pointed out that some publicly traded payment companies have pledged to include Bitcoin in their core activities, which further demonstrates the performance of Bitcoin prices. However, he admitted that this “will not change Bitcoin’s high market volatility in the short term,” but will at least be a qualified investment.
Kris Marszalek, CEO of exchange and crypto card publisher Crypto.com, advised Cointelegraph that institutional investments have an impact on the cryptocurrency market and suggested that their continued participation can strike a balance in this area: “Investing in Bitcoin Today Compared as of 2017, when it was mainly dominated by retail, it is prone to more dramatic market trends. “He added:
“Today we are seeing large investors like Michael Saylor at MicroStrategy who have taken large Bitcoin positions with a long-term thesis-based approach. A large part of their thesis is that BTC is not only a hedge against inflation but a better hedge than gold. Their size and thesis may bring more long-term stability to the Bitcoin market.”
Marszalek also highlighted the fact that some well-known traditional financial asset management firms like Fidelity and JPMorgan Chase are advocating that clients use 2% to 5% of cryptocurrency risk in their investment portfolios. He believes there are signs that the trend is changing: “There is no doubt that people’s perceptions of BTC have shifted from danger to peace. As a result, BTC is safer than before as a long-term hedge, but it carries still the same risk as any other investment.
Regulation plays a role
As interest in this area continues to wane, regulatory-related issues remain at the centre of discussions about a possible long-term adoption and appreciation of cryptocurrency. Wirex’s Matveev agreed that regulation is likely to have an impact on cryptocurrencies, which are considered regular long-term investments for the next several years, and continued to grow:
“Like with all investments, there’s an element of risk so it wouldn’t be right to say that any investment is 100% safe as the markets are constantly changing, but I think public opinion is beginning to sway towards seeing crypto as a great alternative to regular payments.”
Well-known hedge fund manager Ray Dalio took part in the Bitcoin conversation in a personal post on LinkedIn at the end of January. Dalio is known as a supporter of long-term investments and value stores. In an article he wrote to avoid “media misunderstandings,” Dario described many of the reasons why he believes Bitcoin has become an “alternative gold value”. At the same time, Dario believes that the limited supply of Bitcoin is at the centre of controversy, as other cryptocurrencies that play a similar role may offset the limited supply.
While pointing out that Bitcoin has seen obvious successes as a new invention in the decade since its birth, Dario also stressed the fact that governments and banks will not simply allow a competitive system to disrupt the global economy. Control, especially concerning privacy protection. Bitcoin services for users:
“It is hard for me to imagine that they would allow Bitcoin (or gold) to be an better choice than the money and credit that they are producing. I suspect that Bitcoin’s biggest risk is being successful because if it’s successful, the government will try to kill it and they have a lot of power to succeed.”
Marszalek’s company operates in multiple countries and has direct experience working with regulators. He highlighted his base in Malta. This is a good example of the potential benefits of clear and fair regulatory parameters: “2020 will be a year of significant progress in regulating cryptocurrencies. A. Malta is one of the few jurisdictions where the European Union has developed a clear legal framework for digital assets, to protect investors. “
Although the outlook for the Bitcoin and cryptocurrency markets is very optimistic, there are still great risks involved in investing in this area. The cryptocurrency market is still in its infancy. As mentioned above, there are still a few areas that need to be addressed before Bitcoin and other cryptocurrencies can truly become proven long-term investments.