As we remain in a macro-driven investment environment where stores of value are thriving, it’s never been more important to keep track of Bitcoin’s progress, both from the retail and institutional sides. With that under consideration, last week, we attended Bloomberg’s Crypto Summit to gauge the current institutional sentiment on crypto’s leading asset. Below, you’ll find 5 key takeaways related to both Bitcoin’s value proposition as well as what institutional players think 2021 has in store for the crypto pioneer.
1. Despite 2020’s progress, we’re “still in the price-discovery stage.”
Mike McGlone, who has emerged as an institutional supporter of Bitcoin as a store of value since late last year, opened Bloomberg’s Crypto Summit by stating: “it’s just prudent now to put some of your assets in Bitcoin.”
Simultaneously, however, he also made sure to point out that by 2024, he expects Bitcoin’s volatility to “be the same as gold’s,” and as of now, it’s never been more important for investors to understand what stage of Bitcoin’s lifecycle we’re currently in. Imagine that crypto’s leading asset is a tech company. In that case, we can say that we’re currently in the early adoption stage.
If we flip the same rule of thumb back to Bitcoin as it truly is, then the equivalent would be “the price-discovery stage.” Using this benchmark, McGlone went on to say that the next milestone for Bitcoin to hit is $100,000, which it should be noted is relatively arbitrary, as with all price predictions.
What’s more important, however, is his conclusion that as long as the key macro factors continue to tilt in favor of Bitcoin, it should continue to consistently grow. In other words, as long as interest rates remain historically low and bond yields stay negligible, McGlone believes that Bitcoin will continue to sustain a long-term bull-market.
Still, since the effects of COVID-19 on the global economy can’t last forever, the major test will be when interest rates and bond yields begin to rise back to pre-COVID levels, which will indicate a major resurgence of traditional markets. If Bitcoin finds itself able to withstand that resurgence through sustained growth in both price and market cap, then a strong argument can be made for its’ current bull-market stretching out to a multi-year horizon despite a shift in the global-macro environment.
In any case, as of now, despite the influx of institutions into Bitcoin since October 2020, when we stand Bitcoin’s market cap up to that of say, gold, it’s easy to see just how early it still is. With that under consideration, “price-discovery,” as mentioned above, may be understood as “still thinly-traded” as compared to similar assets. Despite this, given Bitcoin’s fundamentals, i.e., digital scarcity and decentralization, it’s reasonable to wonder if it’s actually its’ uniqueness that will serve as a barrier. Perhaps, it’s still to difficult for much of the world to understand what Bitcoin’s staying power is. Yes, it’s done well when other markets are turbulent, but what about after the storm passes? If that’s the case, then providing progressively higher quality crypto education to investors of all backgrounds has never been more important.
2. Institutional investments in Bitcoin “establish air cover for retail investors.”
“I think over the course of 2021, we’re going to see more corporate participation in this asset class because really, the career risk has gone from why to why not and these are long-term strategic allocations for a lot of these types of investors.”
Michael Sonnenshein, the CEO of Grayscale Investments, kicked off his participation in a segment titled, “The Digital Hedge: Situating Cryptocurrencies in the Macro Environment,” with the above quote, when asked where he thinks Bitcoin adoption will go down the road. Essentially, both he and Cathie Wood, the CEO of Ark Investment Management, echoed the same sentiment that as long as macro-factors like interest rates stay in Bitcoin’s favor, 2021 should be an even more impactful year with regards to the legitimization of digital gold in the institutional sector. Still, both panelists also made sure to throw their weight behind the notion that Bitcoin’s still in its’ early-adoption stage. “We are so early, that $900–950 billion market cap or network value gives you a sense of how early we are,” Wood pointed out, while discussing the road ahead for the top cryptocurrency.
In the end, however, both Wood and Sonnenshein seemed to agree that Bitcoin has already established itself as a “life raft” away from the traditional financial system and consequently, a revolutionary store of value. Therefore, if this continues to be the institutional consensus on Bitcoin’s value, then the same thesis should continue to drive all adoption of digital gold over the long-term.
3. Do CBDCs threaten Bitcoin?
The more that Bitcoin demonstrates its’ staying power, the more the idea that central bank digital currencies(CBDCs) may undermine it seems to surface. In a panel titled, “Central Bank Digital Currencies: Futuristic or Real,” Cuy Sheffield, the Head of Crypto at Visa, and Sheila Warren, the Head of Data, Blockchain and Digital Assets at the World Economic Forum, discussed CBDCs as they stand today and whether or not they truly represent any sort of threat to Bitcoin.
Generally, all panelists sided with the latter conclusion, with Warren stating, “my view has always been that crypto, CBDCs and stablecoins have different roles to play in a broader financial ecosystem. They’re different things.” In her view, the best heuristic to use when trying to understand why these three types of digital assets aren’t competitors is that fundamentally, they all solve different problems.
For example, judging by institutional inflow, Bitcoin is effectively “the new gold,” while “CBDCs” are the new fiat currencies, made for the digital age. Stablecoins, by extent, would be similar, but engineered to work within blockchain-based systems. With that simple comparison in mind, it’s fairly easy to begin to understand why CBDCs aren’t a competitor to Bitcoin. During the panel, Sheffield added weight to this notion, saying:
“we(Visa) see most of the demand for Bitcoin is to hold it as digital gold and as a store of value. We don’t see a lot of demand for people to spend Bitcoin.”
In an overarching sense, the same value proposition that we’ve been echoing in all of our content still reigns supreme. Bitcoin, by and large, is being treated as a new, better savings account. Still, this doesn’t mean that CBDCs and Bitcoin won’t have any similarities. As Warren pointed out, CBDCs will likely draw inspiration from the crypto sphere in how they allow for programmability or the attachment of smart contracts to the ledger that each CBDC runs on. Imagine having cross-border transfers approved by code in a matter of moments, with little to no human involvement. That’s only one of many possibilities with respect to programmability. All in all, for now, the panelists agreed that Bitcoin and CBDCs can and should exist together.
4. Tech companies could drive the next wave of institutional adoption.
During the final segment of the event, titled, “The Value of Bitcoin,” Caitlin Long, the CEO of Avanti Bank & Trust, suggested that due to the high level of cash reserves they’re currently sitting on and the fact that global interest rates and bond yields are still largely negligible, tech companies could lead the next wave of institutions into Bitcoin. As to exactly what companies might be first in this respect, it’s difficult to say. There has been speculation that Twitter’s recent announcement of a $1.25 billion convertible note offering could mean that like MicroStrategy, they’re going to use those funds to dive into Bitcoin in a big way. Admittedly, Jack Dorsey’s status as the CEO of Square Inc., who led the institutional charge into Bitcoin last October, lends credence to this possibility. Even so, however, there’s currently no indication that this is the path that Twitter will take. For now, the opinion of the speakers at Bloomberg’s Crypto Summit and the financial industry at-large is that it’s best to simply wait and see who decides to be the next Square or Tesla.
5. Bitcoin’s longevity and status as a first-mover cement it as “digital gold.”
Since its’ launch in 2009, the most consistent argument for Bitcoin’s value, by far, has been its’ status as “digital gold.” By and large, the speakers at the event confirmed this to still be the leading value proposition. Regardless, as the year unfolds, it will be interesting to watch what new products groups like CoinShares and Grayscale choose to introduce, especially since Sonnenshein, the CEO of the latter company, indicated that they aim to continually release products that offer “security-based exposure to Bitcoin” and other companies will likely follow suit. Since Grayscale is already taking in the bulk of the new bitcoins being issued, it’s logical to conclude that further offerings of new security-based products could push Bitcoin and the crypto markets at-large into a supply shock such as we have never seen before. If you’re interested in keeping up with that possibility, be sure to circle back to our introduction to the current supply shock and familiarize yourself with the key metrics that we mention there. For now, however, any suggestion of Bitcoin becoming even harder to come by is largely hypothetical.
Where does all of this leave us?
In an overarching sense, the consensus from Bloomberg’s Crypto Summit is that Bitcoin’s at a major inflection point. As the year goes on, you can expect that we will provide more valuable analysis of industry events to help you track its’ progress and evolve your investing/trading toolset. With that in mind, this week, we’ll be attending CGC|NFT, an event focused on illuminating the value of NFTS(non-fungible tokens), to add weight to our upcoming update on Ethereum’s value next week. Until then, make sure to follow this blog and our Twitter so that you can be the first to receive all of our latest content and all of the latest developments on NBX’s offering at-large. Finally, if you’re not an NBXer yet, consider signing up via the clickable link below!
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Disclaimer: Content provided does not constitute financial advice. All regulatory opinions should be taken as speculation and not as fact, until proven as true by relevant documentation from the regulators involved.