This week in Crypto
Price action and sentiment across the crypto markets remains firmly bullish this past week, with BTC (+6% WoW) consolidating and then breaking through $12,000, whilst ETH (+11% WoW) has broken through its $400 resistance and seemingly has plenty of head room for further gains.
This is an interesting setup between the two largest cryptocurrencies to observe (and trade) and one that will likely continue in the coming weeks due to the ongoing interest in the DeFi space, which is helping drive the price of ETH higher at a faster pace. ETH is still ~200% away from its all time high whereas BTC is ~60% away — metrics that are attractive to new retail traders entering the market in their droves looking for a way to deploy capital. From this perspective, the short BTC / long ETH momentum trade may continue to have legs in the short to medium term, especially with the increased mainstream media interest in the asset class we have seen recently as highlighted below.
Paradigm Shift
There is a rather self-fulfilling prophetic situation playing out in the current price action, fueled by memes and more recently the rather unconventional approach to investing of Barstool Sport’s, Dave Portnoy and his comical green hammer. Dave is now hyping Bitcoin and Alt coins to his huge social media audience of predominantly retail investors, and last week invited the Winkelvoss twins on his blog to discuss Bitcoin. Despite the rather cringeworthy content, this mass marketing was picked up and commented on by Elon Musk and mainstream media across the board. This type of exposure is extremely valuable to Bitcoin’s adoption and awareness amongst retail investors, regardless of how it may be delivered.
More crypto advertising and marketing was released last week from leading institutional investment vehicle, the Grayscale Investment Trust which continues to swell with over $5.6 billion of crypto assets now under management. Grayscale owner, the Digital Currency Group, used some of their vast profits to launch a US wide TV ad campaign that was aired on CNBC, MSNBC and FOX networks — the full ad can be viewed here. Bitcoin and digital asset marketing at this level of professionalism, credibility and scale certainly didn’t happen during 2017’s bull market and is indicative of how much the space has matured. Grayscale reported a $217m inflow of investment since the campaign, a solid ROI any way you cut it.
Moving up a level in institutional reach, Goldman Sachs recently performed a spectacular U-turn in their attitude and approach to crypto and Bitcoin. For context, in May, the bank hosted a conference call (with accompanying slide deck) whereby they stated:
‘’We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients’’
Fast forward a few months, they have now just hired a Global Head of Digital Assets to build out their crypto team in Europe and Asia. Tyler Winklevoss’ read on the situation back in May was superbly accurate…In summary…don’t do what they say, watch and do what they do!
GS’s presence in the market is certainly big news and clearly their clients have demanded product coverage and exposure, perhaps a result of increased exposure and awareness from the likes of Grayscale, Mr Portnoy or Galaxy Digital’s recent full-page advert in the UKs Financial Times. Failure to meet this demand would risk losing these clients as they would likely move their capital (and fees) to the likes of Fidelity or JPM who are already building out and offering products and services. GS entering the market, despite their explicit negative view on crypto only months ago shows how crypto, unlike many new asset classes exhibits a ‘’trickle up’’ adoption, that is to mean retail are the first in, and institutions are the laggards.
Corporate awareness continues to unfold with real world BTC adoption by MicroStratagy Inc, the largest independent publicly-traded (NASDAQ) business intelligence company with a market cap of $1.42 billion. The firm just reported that it has moved a substantial part of their treasury into 21,454 BTC.
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.…Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.” — Michael J. Saylor, CEO, MicroStrategy Incorporated.
This is really significant news and many CEOs and competing shareholders up and down the NASDAQ will be looking at this treasury strategy and MicroStrategy’s immediate +15% stock price bump. This could turn out to be one of the great business decisions of any public company, and we are sure this won’t be the last we hear of BTC being used in traditional treasury management by private and public companies.
For those of us who have been in the industry for quite some time, the convergence of retail and institutional awareness and interest suggests that there is a paradigm shift in thinking towards digital assets. One only needs to read the FT on a regular basis to see that the tone of mainstream media is shifting from ‘this is a fad’ to ‘digital assets are here to stay’. The next evolution will be in Central Bank Digital Currencies which may in turn be a disruptor to banks themselves as suggested in the FT this morning which we will discuss more in due course.
‘If people can bank directly with the state, then it would seem foolish to take the risk of parking deposits with a private lender.’
Taking a leaf out of Goldman’s book of U-turns, Warren Buffet has succumbed to the realisation that the fixed income market is under pressure from real negative interest rates. Despite slamming gold as an investment many times over the years, the 81 year old investor has moved into a $565m position in gold miner Barrick Gold. Much like MicroStrategy Inc, Buffet’s concerns with the fiat system are reflected by his actions and perhaps as a product of his age, he chose gold over Bitcoin to hedge his portfolio’s inflation risk. Like MicroStrategy, we expect to see more of these types of investments by prominent leaders in business and finance and ex-Prudential CEO George Ball’s recent endorsement is no exception.
There’s no yields today, so Bitcoin or another cryptocurrency becomes a very attractive either long term safe haven for my money or a short-term speculative bet. And I think it’s a good — I think it’s where many people will turn after Labor Day — Ex-Prudential CEO George Ball
Whichever way you look at it, the market is awash with increasing public awareness of digital assets which reinforces many of the different narratives that exist within the market. Be it inflation hedge, digital gold, savings technology or means to gamble and speculate for profit, endorsements and media coverage all contribute towards this next bullish cycle in the markets.
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