2020 and into 2021 has been an incredible time for both the major Crypto players. As mass adoption now starts to take place, countless corporations (predominately within the Tech sector) have been converting portions of their cash balances over to Bitcoin. Major Institutions began to take note as 2020 pushed into H2 and Q3. Many US hedge funds also came in to the game, be it a little late to this party. But they have continued to invest into Bitcoin. The new offerings of BTC backed loans, BTC ATM’s across the US, BTC. Vast offerings of Bitcoin ETF’s across Canada & soon to be approved in the USA. Almost every major US bank is offering exposure to BTC, but only to their wealthiest clients. As El Salvador adopts BTC as legal tender & countless US companies now offer major sports teams & fans the opportunities to be paid in BTC as well as pay for tickets & goods in BTC. And as we see the end of July upon us, we now have rumours that Amazon will soon be accepting BTC for payment. This is just the beginning of mass integration to facilitate crypto into all of the major tech platforms. Those companies who do not quickly allow for this integration will miss out on billions of dollars of revenue. Smart players like PayPal are rapidly expanding their Crytpo services.
The most major disruptor we have within the Crypto markets as we see the end of July 2021 roll in, is the short term volatility from Bitcoin mining displacement in China. Due to yet another round of Crypto crackdowns in China forced selling is now under way. We firmly believe this is extremely S/T. And remain incredibly bullish across the entire sector. Much of the Chinese BTC miners are in the midst of relocation and recapitalization. This is possibly the greatest opportunity to accumulate BTC & ETH that will see for a very long time.
Too many of the wealthiest most astute US investors and players continue to swoop up BTC. Unlike the average retail investor, the institutional investor is not usually phased by huge sells offs and volatile price swings. Every time the retail sell off their BTC, the institutional investor comes in and buys up more and we see a perpetual drive up of the price. This market is looking very long term at this underlying asset, with tremendous amounts of vigorous and deep research into this asset. 80% of all Bitcoin is being held L/T, that by it’s very self speaks volumes.
BTC is finite, at 21 million coins there will be no more mined, like Gold this makes Bitcoin an SOV (store of value) asset. A form of digital gold. With it’s market cap of approx $1T on any given day, it’s got a long way to go to catch gold’s $9-10T market cap. We believe it has substantial upside left ahead in the coming years. A $1 TN market cap creates the perfect pool for BIG money to start to play in. Over the longer term we expect price volatility will start to peter out.
We do not believe BTC will be a replacement to Fiat currency. Though BTC is absolutely a disruptor. When it comes to a real viable challenge to Fiat currency we think ETH will be ahead of the pack. Ethereum is by definition it’s own entire network with coding and tokens (Ether) which are payment systems. Ethereum is by far the most widely used and accepted platform on the blockchain. ETH is peer to peer and can be processed at over 10x the speeds of BTC. Making it ideal as a viable payment method. Ethereum has also been widely adopted the most by Corporate America. JPM built a rather extensive platform base in Ethereum. ETH is also outpacing BTC 3:1 in terms of gains so far in 2021. And we believe Ethereum also has a lot more potential ahead of it.
Crypto remains an ambivilent topic of discussion, especially to more traditional investors who do not see any form of cypto as either a viable asset (SOV) nor a form of real usable currency. Elon Musk recently announced he was pulling Bitcoin as a form of payment for Tesla’s due to “Environmental concerns” from Bitcoin miners. Sending short term ripples throughout the “Crypto” world. BTC mining is rapidly evolving to be environmentally sustainable. Elon Musk also revealed his biggest holdings after Tesla & Space X are BTC & ETH. No doubt that is a L/T net positive for the success of this market.
There are many who simply do not understand the vast complexity of blockchain and to what extent it is already disrupting the global financial system. And then there are the completely miss-informed who wrongly believe it is a currency solely made up of “Criminals”. Those beliefs are spurred by random headline slogans. Invariably written by old school Politicians & Financiers, who either have no perception of this new sector, or frankly do, & therefore greatly fear it, for it will forever change the face of Banking & Finance.
When we see institutions like Mass Mutual, a 169 year old Company making a $100M investment into Bitcoin and Ruffer Investment who put around 3% of their $27B portfolio into Bitcoin in December 2020, every major US bank offering their wealthiest clients access to Bitcoin funds, we know these smart players are in this for the long haul. And we believe good quality Crypto’s are going to continue to be spectacular investments. Microstrategy raised a further $500M in order to acquire more BTC during the recent crash. Microstrategies holdings in BTC are frankly enormous.
At PBFX, we have L/T holdings in both BTC and ETH, and we continue to add to positions at every foreseeable opportunity. Increased demand is sure to create a supply squeeze in BTC imminently, adding to long term upward price projections.
Asset allocation.
BTC & ETH are roughly 40% each of the major Crypto portfolio. With the remaining 20% allocation split with several other key Crypto’s. Further future Crypto portfolio’s will very likely see different % asset allocations.
