Feb 4, 2021
Bitcoin is set for mass adoption in 2021
Buckle up, Bitcoin is about to go mainstream as a reserve asset for the world
With all the craziness that happened in 2020, it doesn’t seem as if 2021 will be any less dramatic if January is anything to go by. Governments have injected trillions of dollars of capital into their economies over the past 12 months and they don’t plan on slowing down this year with second rounds of stimulus planned in many countries. Coupled with negative interest rates as well as poor bond yields and suddenly high net worth individuals, corporations and funds have a major problem on their hands, what do they do with their cash reserves?
In a recent report from Glassnode analyzing the concentration of bitcoin’s supply they discovered something quite interesting but not surprising, those with a lot of money are accumulating bitcoin at increasing rates. The chart below shows the total number of unique entities with balances of >1000 BTC and their change in bitcoin supply held over the last 12 months. Clearly, 2020 was an accumulation year and this is no surprise to see considering the number of corporations we saw finally get their feet wet with bitcoin as a reserve, a great list of the largest known holders can be found here. However, you can see that 2021 so far has seen a huge uptake in both the number of total whales and their total supply held well beyond the existing uptrend that existed throughout 2020.
This is a sign that 2021 will be a big year for bitcoin, a year when it becomes recognized as a credible asset among high net worth entities looking to escape the woes of heavily diluted fiat currency. I predict we’ll see a greater number of corporations and HNWIs trade a portion of their cash reserves for bitcoin over the year and into the decade as it seems the only thing central banks can or will do is continue to inject capital into the economy. While this continues to happen along with worsening bond rates and negative savings interest we’ll inevitably see these large cash reserves held around the world flood into stores of value and appreciating assets to beat the yearly devaluing they’ll experience otherwise.
He makes clear the strategy is based on bitcoins sound monetary policy and its store of value potential rather than some speculative gamble.
Bitcoin is set to take a large portion of these incoming cash reserves and the data is already showing this occurring. A first mover in this approach is Microstrategy who has continued to cost average into a very large bitcoin position of now 71,079 btc or roughly $2.5 billion at today’s price. Their position is quite notable for the sole reason they are not an investment fund or bitcoin enterprise they are primarily a business intelligence software company unrelated to bitcoin or cryptocurrency. This move thanks to their founder Michael Saylor who credits 2020s excessive central bank injections as the final justification to start allocating cash reserves into Bitcoin. In interviews he makes clear the strategy is based on bitcoin's sound monetary policy and its store of value potential rather than some speculative gamble.
As one of the first movers to use bitcoin as a store of value reserve asset Microstrategy has put their money on the line and paved the way for other high net worth entities to follow suit. They’ve also begun to teach other corporations in the same position how to go about buying large and the regulatory requirements of this. Recently holding a bitcoin conference for corporations to discuss its use as a treasury reserve asset with over 1400 firms attending, some notable attendees including reps from Space X, Visa, Pfizer and Disney.
If this trend continues during the decade it’s likely we’ll see the next step to this evolution with various central banks also allocating bitcoin to their reserves.
As we head into a new decade and bitcoin crosses the 12 year mark it seems to be becoming normalized as a credible asset and not just a speculative gamble for high-risk hedge funds and retail. It seems as if its maturing at a rapid rate pushed ahead by the economic crisis and growing into a worthy reserve asset for high net worth entities to start allocating in size to. If this trend continues during the decade it’s likely we’ll see the next step to this evolution with various central banks and treasuries also allocating bitcoin to their reserves.
With bitcoins capped supply and stable release schedule, this means an influx of large cash reserves from high net worth entities will drive appreciation of bitcoin against fiat currencies to levels unseen before and it’s already happening. It seems as if all the stars have aligned in bitcoins favor over the last year with economic crisis, massive inflation, extreme uncertainty as well as negative rates and we’re also coming up to a year post the halving which is usually when things start to pick up in the cycle. All in all 2021 is shaping up to be a great year for bitcoins acceptance and credibility as an asset.
Just look at the Usd to Btc 5 year chart below and the answer is clear, keep your reserves in ever diluting fiat and have less purchasing power against bitcoin every year or exit the depreciating dollar and take control of your money.
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Disclaimer: The above article is not financial advice. I have owned bitcoin for some time and continue to purchase it. Before investing your money be sure to completely understand what you’re investing in and why.
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