- $100K Bitcoin speculation grows as sophisticated and retail investors climb on board
- ‘Driving the price action is clearly that institutions have now found a place in their portfolio for Bitcoin’
- Stock-to-flow modelling, valuations based on gold, point to a Bitcoin price this year of $128,300
Talk of $100K Bitcoin is growing louder after the cryptocurrency king surged to a fresh all-time high Wednesday of $US35,240 ($45,345) on a raft of reasons including political uncertainty in the US, a weaker US dollar and relaxed central bank monetary policy.
Cryptocurrencies are also starting to earn a place in the investment portfolios of conservative institutions because of their rapid price growth and as a hedge to other assets and currencies.
“Driving the price action is clearly that institutions have now found a place in their portfolio for Bitcoin, whereas previously that was a position for gold,” Leigh Travers, executive director of ASX blockchain technology company DigitalX (ASX:DCC) told Stockhead.
DigitalX operates the DigitalX Bitcoin Fund that is designed to track the price of Bitcoin.
The fund provides investors with direct exposure to the cryptocurrency without the hassles of acquiring, securing and disposing of the cryptoasset.
The Bitcoin Fund grew 87.5 per cent in the year period ended October 2020, compared with a growth rate for gold of 23.3 per cent, and negative 9.8 per cent for the ASX All Ordinaries index over the same period.
DigitalX regularly buys Bitcoin for its fund which had $10m under management according to latest figures for the September 2020-ended quarter.
Asset security is the number one priority for DigitalX and its Bitcoin Fund and the company goes to great lengths to protect and safeguard its Bitcoin.
DigitalX has a 15 per cent stake in the management of xbullion, a blockchain-based gold bullion product that is audited, insured and securely vaulted.
Traditional money managers looking at Bitcoin
A wave of traditionally conservative institutions is moving into the market for cryptoassets, such as family investment offices, pension funds, and portfolio managers.
“They are not doing it for a short-term trade because they think it is a speculative asset,” said Travers.
“They are doing that as part of diversifying their assets, to get uncorrelated and outsized returns, and to make the first part of an allocation.
“They are not looking to sell if the price adds 50 per cent in two weeks. They are much stickier investors that are starting to allocate, and they are some of the world’s largest investors.
“These investors that are coming to Bitcoin are there for the longer term, and are buying each day or each month to build up their positions.”
The upsurge in institutional and other large investor interest in Bitcoin is absorbing the available supply of the digital currency.
Digital payments companies PayPal and Square are regularly transacting in Bitcoin and other cryptocurrencies and are…