Why investors say bitcoin’s 2020 surge is not like 2017 – Quartz

It’s been annus horribilis, but not for bitcoin.

The cryptocurrency is up over 200% this year and has been on a steady tear over the past few months. At press time, single bitcoin was priced at around US $ 23,300. Just 90 days ago, it was trading just above $ 10,000.

For many bitcoin skeptics, the sharp spiral reminds one of the 2017 holidays, when, as one of my Quartz colleagues recently noticed, “you couldn’t stand in a group of three or more dudes and not talk about bitcoin. ” That was the year bitcoin hit its all-time high at just over $ 19,700, before plummeting 30%. Gay people are watching for another shocking correction now.

However, investors and traders who believe bitcoin is bigger than the Ponzi scheme say the 2020 surge is different, largely because of who is shopping for it. Three years ago, the enthusiasm for the digital coin came from retail investors. This time, some large institutional investors have decided to enter the market.

In May, Paul Tudor Jones, billionaire hedge fund manager and founder of Tudor Investment Company, made a splash by buying bitcoin, which is still a marginal asset for investors of its stature.

Jones was actually dipping for the second time. In 2017, its fund bought and sold bitcoin, always leaving near the top of the asset, Bloomberg reports. This year, while watching central banks spend billions to make up for losses from the coronavirus pandemic, Jones went looking for a reliable hedge, according to a market forecast note he wrote in May, and bitcoin meets its criteria.

“I am neither a hard money nor a crypto nut,” he also noted in the note. “The most compelling argument for owning Bitcoin is the digitalization of currencies everywhere, accelerated by Covid-19.”

(Jones has said he holds between 1-2% of his fund’s total assets under management – pegged at $ 9.2 billion in 2020 – in bitcoin.)

Meanwhile, the rising market price of bitcoin also made many cryptocurrency asset manager customers called Grayscale much richer this year. Grayscale Bitcoin Trust, launched in 2013, sells publicly traded shares in bitcoin-holding trusts, a way to bypass regulations against bitcoin ETFs. In short, it has created a path to owning crypto that feels more secure for mainstream investors, and therefore worth a hefty premium. In January, it became an SEC reporting firm, which meant more investors would be eligible to buy into the trusts. Its total assets are now $ 13 billion, up from $ 2 billion a year ago, and this year its inflows reached $ 1 billion a month. Investors who feel most comfortable in stocks and bonds obviously have some FOMO.

Just a few days ago, Michael Saylor, CEO of Microstrategy, a business intelligence firm, spied on a $ 650 million bitcoin purchase by issuing debt, “a bold bet for any publicly traded company, especially for one whose business model is not even focusing on cryptocurrencies, CoinDesk chose writer, but Saylor “nevertheless put all criticisms aside.” Overall, Microstrategy has spent $ 1.1 billion on bitcoin so far, at an average price of just under $ 16,000 a penny, Saylor was published in a tweet. Earlier this week, the CEO triggered a Twitter frenzy when Elon Musk dared to make a similar bet with US dollars on Tesla’s balance sheet. Oddly enough, Musk signaled curiosity about the prospect.

Other bitcoin 2020 landmarks are tied up with household brands that have attracted small, individual investors. Paypal announced it would allow its customers to buy and sell bitcoin on its site in October, following payments firm Square and Robinhood, a stock trading platform, which both entered the cryptocurrency market two years ago . Last month, a study by Pantera Capital found that Paypal and Square users are grabbing the majority of new bitcoin entering the market on a daily basis, and probably raising the price as well. Then, in early December, Visa joined BlockFi to launch a credit card that rewards customers with bitcoin.

None of this is a guarantee that bitcoin is not in a bubble or that it will collapse to nothing. For every buyer who claims bitcoin can rise to $ 100,000 or $ 400,000, there are a number of respected investors, bankers and economists who call the digital currency junk, worthless, and a scam, even if more traders and investors are counting on its widespread survival and adoption.

Large companies that can afford to take chances may be warming up to digital coins, but it’s still one of the most risky investments out there. Even Jones called it “great speculation.”