Authored by Juan Villaverde and Bruce Ng
Why pay attention to what hedge funds, university endowments, pension funds and other big-foot institutional investors are doing?
Because that’s where the big money is. And Bitcoin is one of the only cryptocurrencies big and liquid enough to absorb institutional-sized capital inflows.
There’s just one problem. Few institutional investors have governing charters that allow them to buy cryptocurrencies. But almost all of them can buy common stocks.
And now, an SEC-registered, closed-end fund is opening the door for all these institutions to invest in crypto.
Grayscale Bitcoin Trust (GBTC) shares — each equivalent to 0.00096086 BTC — trade freely over-the-counter, so anyone can buy them.
This is a very big deal. It reminds us of what happened to gold prices after the first gold exchange-traded funds (ETFs) opened the door for investors to buy bullion in the stock market.
Gold prices quadrupled in seven years.
And you should look for even bigger gains as GBTC opens the floodgates for anyone to buy Bitcoin “in the stock market.”
Roughly 88% GBTC shareholders are big banks, hedge funds, and big-foot professional investors. That makes money flowing into it is one of the best indicators of institutional interest in cryptocurrencies.
Big-Foot Institutional Investors Quietly
Shovelling Money into Bitcoin
Figure 2 shows the weekly flow of funds into Grayscale Bitcoin Trust from April 2019 to March 2020.
Between the third quarter of 2019 and the first quarter of 2020, the amount invested in more than doubled — from $388.9 million to $818.5 million.
This is further confirmed by anecdotal reports the “smart money” on Wall Street is finally starting to pour money into crypto.
For example, legendary trader and Forbes 400 billionaire Paul Tudor Jones recently told CNBC he’s putting 1% to 2% of his assets in Bitcoin.
Based on the size of his hedge fund (Tudor BVI — with $21 billion in assets under management) that comes to a whopping $210 million and $420 million.
And with the Federal Reserve printing $2.9 trillion in just 13 weeks, this river of paper money seems set to flow even faster going forward.
The Case for Bitcoin at $180,000
For centuries, investors losing confidence in paper currencies have turned to gold as a store-of-value. But now, there’s a new kid on the block: Bitcoin.
Like gold, Bitcoin is scarce. It has a hard ceiling on the maximum number of coins that can ever be created. But gold is heavy (70% heavier than lead). To transport it you need to hire guards with guns.
Plus, you need an expensive steel vault for safe storage. And even then, nothing keeps a hostile government from sending soldiers to seize it.
By contrast, Bitcoin is weightless. It moves via the Internet at the speed of light — at near zero cost. And unlike gold, it is virtually unconfiscatable.
The only physical manifestations of your Bitcoin ownership are the character strings that comprise…