2020 was unforgettable, especially for Bitcoin. To help commemorate our readers this year, we asked our network of contributors to reflect on Bitcoin price action, technological advancement, community growth and more in 2020, and reflect on what this could all mean for 2021. The writers responded this with a collection of thought provoking articles. Click here to read all the stories from our End of Year Series 2020.
In previous years, traditional investors and businesses had been opposed to opening their arms (and wallets) to bitcoin. For many, it had too many unknowns, too much risk and too many baggage. Not to mention the mountains of hit pieces drafted by mainstream media outlets that ruin Bitcoin for a myriad of reasons: Bitcoin is just a ponzi scheme backed by nothing at all, they said. Bitcoin will be banned. It’s for criminals. Bitcoin is too volatile to be a good store of value. Someone else will copy it. Even legendary investor Warren Buffet threw his hat into the ring, noting that Bitcoin “probably squares rat poison” at Berkshire Hathaway’s 2018 annual shareholder meeting.
But not only has bitcoin gone to nothing by 2020. This year has been marked by the adoption of bitcoin by reputable investors, hedge funds, financial institutions and businesses.
All of the above narratives that state that Bitcoin is dead continue to be broken repeatedly. The more time you spend researching and learning about each of these alleged shortcomings of Bitcoin, the more it becomes clear that they are without merit. 2020 proved that times have certainly changed.
The risks associated with allocating to bitcoin have now been reversed. It is now more of a risk not to own any bitcoin and with each passing day, it seems that more and more investors, companies and commendable organizations have decided to dip their toes’ r water by taking a job in bitcoin. Let’s take a look at some of the most notable recent examples.
What do Paul Tudor Jones, Stanley Druckenmiller and Bill Miller have in common? They are all part of the growing list of wealthy investors bullish on bitcoin. Let’s take a look at what some of them have said about it.
Paul Tudor Jones
In a letter addressing investors, Jones prefaced readers by outlining the massive money printing that has taken place so far in 2020.
“We are witnessing the Great Financial Inflation, an unprecedented expansion of all forms of currency unlike anything the developed world has ever seen.”
In his full letter, readable here, Jones went on to explain how he expects large amounts of capital to flow into safe haven assets to avoid this inflation. Bitcoin’s limited, limited supply means it has extreme shortages. It can offer an inflation-proof hedge against financial and fiscal irresponsibility by central banks and governments.
“The best strategy to increase profits is to own the fastest horse. If I am forced to anticipate, my bet is that it will be Bitcoin. ”
Paul Tudor Jones
The “bitcoin is digital gold” narrative has nailed another metaphor. Druckenmiller is the latest high net worth investor to come out as a Bitcoin creditor.
Druckenmiller attributed this transformation to a Jones-like investment thesis. It sees a bearish dollar scenario lining up for the next five to six years because of the massive stimulus measures taken by the federal reserve and congress.
“Bitcoin could be an asset class that has a lot of attraction as a store of value,” Druckenmiller said in an interview on CNBC.
“I own many, many more times gold than I own bitcoin. But in fact, if the gold bet works, the bitcoin bet probably works better because it’s thinner, more illiquid and has a lot more beta for it. ”- Stanley Druckenmiller
Bill Miller previously managed the Legg Mason Capital Management Value Trust Fund, and had beaten the S&P 500 for 15 years. It has recently emerged as a bitcoin bull as well.
Voicing a similar sentiment to those of Druckenmiller and Jones, Miller has noted that the Federal Reserve is “sewing the money supply” in its long overdue argument on bitcoin. It appears to be a continuing trend for 2020 mouthwatering conversions. The expectation is that unprecedented money printing will cause inflation, and that the hardest assets will benefit the most.
“The story of Bitcoin is very easy. It is supply and demand. Bitcoin supply is growing at about 2.5 percent a year and demand is growing faster than that. ”- Bill Miller
In 2020, Bitcoin became an elephant in the boardroom. In some cases, bitcoin is even held as a “treasury reserve asset” by several publicly traded companies. The spreadsheet on BitcoinTreasuries.org lists the companies that have started allocating to bitcoin.
Perhaps the most significant on this list is Square’s financial and payment services company, with founder and CEO Jack Dorsey citing Bitcoin as an “economic empowerment tool and providing a way for the world to get involved in a global financial system. ”
While Square’s sentiment might sound bullish, it was still spoiled by the move of business intelligence company Microstrategy in August 2020 to put a staggering $ 425 million (85 percent of its treasury) into bitcoin . Microstrategy was followed by the release of a statement:
“Bitcoin is digital gold – harder, stronger, faster and smarter than any predecessor currency. We expect its value to combine with advances in technology, widening adoption, and the network effect that has propelled the rise of so many category killers in the modern age. ”- Michael Saylor, CEO of Microstrategy
As we look towards a highly uncertain future, where free monetary and fiscal policy seems to be the ongoing norm, it would not be surprising to see this becoming a trend. More companies will look for an inflation hedge to protect their capital in an age of massive financial inflation.
In October 2020, online payments giant PayPal announced that it would enable its 346 million users to buy, hold and sell bitcoin on its platform. After initially planning to go live in 2021, PayPal pushed the launch date. It launched its bitcoin offering on October 21 and is already see significant demand.
Although PayPal joined the party in 2020, it is not the only financial institution to offer bitcoin to its users. The Square Cash App currently sells twice as much bitcoin than is currently produced by miners (with almost three times as many users, PayPal is likely to eat ‘ r BTC supply at a staggering rate). And Grayscale has been a behemoth in picking up the newly minted bitcoin supply, too, double its bitcoin holdings since the third quarter of 2019.
What About The Banks?
None of the information touches on the largest financial institutions: the banks. Well, be reassured, because the expectations are that traditional financial institutions might be getting involved soon enough.
The Office of the Currency Manager (OCC), a regulator of banks in the US, recently offered regulatory clarity that could allow banks to participate immediately, if they so wished.
“From secure deposit boxes to virtual vaults, we must ensure that banks can meet the financial services needs of their customers today,” according to OCC’s July 2020 announcement. “This view explains that banks can continue to meet the needs of their customers for protecting their most valuable assets, which today for tens of millions of Americans includes cryptocurrency. ”
What does Derisking 2020 mean for 2021
All of these recent events can help provide a supply fire to any money managers trying to get involved with bitcoin. Publicly traded companies, large organizations and big money investors participating in the game in 2020 are helping to get rid of the bitcoin-related career risk that has satiated in recent years.
Bitcoin is no longer the opposite. In fact, in 2020, it becomes a consensus. It is becoming less and less difficult to get in touch with the new asset class. At the end of the day, it may well turn the risk profile associated with Bitcoin completely. If these established and respected names are now involved and you are not, then you might start to believe that it is riskier not to have any connection to bitcoin than it is to have only some .
This is a guest post by Nick Ward. They are solely their own opinion and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.