Monday, December 21st, 2020
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Your Weekly Update On All Things Crypto |
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2020: The Year Bitcoin Went Institutional |
Almost any way you shake it, 2020 has been a bad year. From COVID to economic depression and even the death of Kobe Bryant, this was one of the hardest years we have faced in our lives. However, Bitcoin has proven once again to be a glimmer of hope, and this time around it is the institutional investors are seeing the light.
An analysis conducted by Chainalysis last week revealed that a new wave of investors has flooded the market. "Investors who bought at least 1,000 bitcoins — worth over $23 million, and have had an account open for less than a year, have driven significant demand since September" the report concluded. The new group of investors bought over half a million worth of Bitcoin and accounted for $11.5 Billion worth of buy-side pressure which helped the price of Bitcoin more than double over the last 3 months.
This marks a stark difference from the last bull market of 2017 that was fueled primarily by retail investors. This time, we are seeing everything from payment processors like PayPal and Square, to tech companies like Microstrategy, to insurance firms like Mass Mutual all piling into Bitcoin and trading their USD balance sheet for Bitcoin. Legendary investors like Stanley Druckenmiller and Paul Tudor Jones have both jumped on the cryptocurrency bandwagon and highlighted its potential as a hedge against inflation. Sign-off from storied investors like these as well as the price prediction of $400K by Guggenheim Partners, make it easier for other institutions to jump on board. They opened the door for moves like the $744M investment made by Ruffer Investment Company last week. What we are seeing is a wave of institutional FOMO that is setting the Bitcoin price ablaze.
Michael Sonnenshein, Managing Director at Grayscale Investments, told CNBC Friday, "We are seeing institutional capital flowing in at the fastest pace in the history of our business, and it is being deployed by some of the world’s largest institutions and some of the most famous investors.” These institutions are driving up the price and sucking liquidity out of the market. Many of them plan to hold Bitcoin for years or even decades. As this liquidity dries up, and retail investors start to pile in, the rocket will truly take flight.
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Coinbase To Go Public: How The SEC Could "Impose Its Will" |
Last Thursday, the largest North American-based exchange, Coinbase, announced that it had filed a confidential S-1, an initial step to listing its shares on a national stock exchange. While this move will surely lead to even more high and FOMO in the cryptocurrency space, it may also subject the exchange to even closer regulatory scrutiny from the SEC.
According to Gabriel Shapiro, an attorney with Belcher, Smolen & Van Loo LLP, the SEC has recently been trying to intervene in the governance process of public or soon-to-be-public entities, even though corporate governance law has historically been defined by state law. “They’ve been monkeying with governance rules like this at the federal level even though there's no federal laws around this,” he said.
For example, the SEC could say that crypto trading platforms need clearer procedures for how they list or delist different cryptocurrencies. This means the SEC could essentially impose its will on which coins get listed on the exchange, and which coins don't.
Confidential S-1 documents are typically kept secret until three weeks before the issuing party goes on its public relations tour to entice potential investors. However, Coinbase chose to "go public" with this filing right away. They may be looking to take advantage of the booming Bitcoin price (currently hovering at all-time highs) as well as the stellar IPO market. “IPOs are hot again,” Shapiro said. “This is a fantastic time to IPO, so they probably want people to know about it, they want people to buy it. The headlines are about BTC so it’s great timing.”
We still have some time to wait before we can jump on this sale, however, only time will tell how the SEC will regulate the company once it goes public.
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Japanese Financial Giant SBI Holdings Acquires B2C2 |
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SBI Financial Services, a subsidiary of Japanese SBI Holdings Inc, acquired UK-based cryptocurrency trading firm B2C2 last week. This marks the first major financial group to run a digital asset desk. SBI purchased a 90% stake in B2C2 but SBI clients have been able to trade through the B2C2 platform since July, when it acquired a minority stake in the firm.
Founded in 2015, B2C2 is one of the world's most popular crypto trading companies for institutional investors. The new acquisition will bring more trading opportunities to both SBI and B2C2, increasing their ability to attract mainstream financial firms looking to invest in crypto. Yoshitaka Kitao, president and CEO of SBI Holdings, says that B2C2's vision and expertise complements SBI's stating "we look forward to working in partnership as we expand out footprint across global markets."
Max Boonen, founder and CEO of B2C2, speaks to Bitcoin's new all time high as once again proving that crypto assets are "not negligible in the financial industry." This is just the start. On track with this, S&P Dow Jones announced a crypto index in 2021 and Fidelity Investments have started to safeguard virtual coins.
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Bitcoin Soars Through All-Time Highs |
The past week has set the crypto world on fire. Bitcoin smashed all-time highs handily and continued to rise all the way to 24,200 at the time of writing. We are truly in un-chartered waters from here on out! But with such a parabolic run-up, we have to stay aware of the possibility of a pullback. But how big will this correction be? If we saw a 30% pull-back, similar to those seen in the previous bull-run in 2017, this would take us down to roughly the $17K mark. If we repeated the last pull-back of 17%, this would take us roughly back to the $20K price point. Both are very possible, however in our opinion, we see the latter as far more likely. This is because large institutions are actively buying up dips, and the likelihood that the dips go as deep as 2017 is slim. The reality is that this bull-run is much different from those of the past. Smart money is pouring into space at a rate we have never seen. These investors are looking for any pull-backs to grow their positions. Simply put, it is a lot easier to dollar-cost average into this market, than it is to try and trade the swings. Keep it simple, buy and hold and hang on tight... the ride is just beginning.
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Alt-Coins Struggle To Keep Up With Bitcoin |
Although alt-coins have had a great week, seeing double-digit growth vs USD. However, most have struggled to keep up with Bitcoin. As large institutions have entered the market, the vast majority have stuck with the king coin, and only invested in Bitcoin. We are seeing the alt-coin market unable to keep up with this level of institutional inflow, and therefore their relative value vs. Bitcoin has been bleeding. We are reaching another critical inflection point in the alt-coin dominance chart. The last time we touched this level of support, alt-coins spiked a 20% rally vs. Bitcoin over the course of only 4 days. If we see this type of rejection again, we will see confidence return to the alt-coin market as they begin to outpace Bitcoin again. However, if we break this critical line of support, which hasn't been broken since mid-2017, the outlook will become very bearish, as funds would be better off held in Bitcoin, than investing in any of these smaller projects. This is a critical line to watch and should be a crucial indicator in any trading strategy.
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Cardano is the first to be founded on peer-reviewed research and developed through evidence-based methods. It is referred to as a third-generation blockchain, designed to handle the Scalability Trilemma, by solving for scalability, security, and decentralization.
Cardano has long been one of the leading projects in the space, submitting more GitHub commits than any other blockchain. But 2021 is the year for Cardano to shine. They have finally released their smart contact capability, allowing developers to finally start building applications on top of Cardano. They have also landed major partnerships over the past few months with projects like Singularity Net and Wolfram Alpha.
Bitcoin has been stealing the show over the past month, but when alt-coins make a resurgence, expect Cardano to be leading the charge.
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SignularityNet is truly a diamond in the ruff. If the vision of this project is fulfilled, it has the potential to grow faster than any other project in the alt-coin space. SignularityNet is a decentralized AI marketplace. It allows narrow AI applications to communicate with each other, and pay each other for their services. The goal is to build a global decentralized artificial general intelligence capable of providing AI as a service. Along with solid partnerships with the likes of Cardano, and Ocean Protocol, as well as the announcement of their entry into the DeFi space with SingularityDAO, AGI is well-positioned to be a top performer over the next year. SingularityNet is also founded by one of the global leaders in AI, Ben Goertzel. With impeccable tokenomics, and parabolic growth in the global AI market, AGI is a long-term buy and hold in our opinion. |
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None of the content or opinions expressed in this newsletter should be consider financial advice. We highly recommend that you do your own research before investing in any project within or outside the cryptocurrency space. |
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