Adoption of bitcoin is accelerating at an unprecedented rate. Bitcoin is the world’s first investment megatrend in which retail investors have led institutional allocators. And until the onset of the Great Corona recession, not much attention was paid to the dynamics by the investment banks, hedge funds and asset management titles.
The rapid and extensive bounce of equities and risk assets in March last year was largely driven by the new power that retail investors represent in markets, empowered by fresh access to information and markets via online platforms around the world. The recent coordinated target of short-term concentrated stocks by the “Reddit Revolutionaries” was reminiscent of the Arab Spring, where the change of government catalyzed the use of social media.
The r / wallstreetbets group was also well informed and showed that it is capable of moving markets, causing political unrest and a temporary concern for the structure of the US stock market’s clearing and settlement structure. Retail investors have now influenced the asymmetry of short-term single-bet equities that require traditional “market-neutral” hedge funds and asset managers to use more sophisticated risk management strategies and mechanisms.
Why we live in the Bitcoin era
Bitcoin has exploded due to the confluence of a number of factors. It is “better to be gold than gold”, as it is immediately accessible (does not require trust in an intermediary, administrator or appointment at the safe), has a lower carrying cost than bullying and has an absolutely limited supply 21 million (while advances in technology refinement and shortcuts to the environment, social and governance can generate more metal).
The pace of change in the expansion of the balance sheet at the European Central Bank (ECB), Federal Reserve and other G4 central banks is unprecedented. The ‘dismantling of fiat currency’ has shifted from ‘crypto kid’ language to capital market language, adopted by the world’s leading strategists to surround the decline in the purchasing power of money and the asset price inflation in the ‘Everything Rally’ to awaken. This spectrum of wealth erosion has, of course, been a well-known dynamic in many emerging markets since World War II, where investors and savers lived with the threat of their wealth disappearing. These conditions have now come since the Great Corona recession in developed markets, where policymakers can exploit the instruments that have been developed and tested since the Great Financial Crisis – and without having to discuss the political moral danger of being seen as can save the banks.
ITI is an emerging, market-oriented prime broker with many assets. ITI made bitcoin strong in the second quarter of last year when it became clear in our core markets that the impact of retail investors on stock markets was a global phenomenon, rather than something limited to the US stock market, as widely reported. ITI noted that the global population was increasingly investing in markets in desperation to make money, rather than the ‘work-from-home gambling culture’ often proposed as fuel for bitcoin.
Then, in the third quarter of last year, bitcoin began to take off the previous December 2017 peak in the currencies of Brazil, Russia, India, China and South Africa (BRICS) and other emerging markets. While U.S. and European observers are debating the question “will it, it will not” break $ 20,000, ITI noted that bitcoin has already made hundreds of millions of people around the world a new highlight in their currencies when it comes to protecting their savings .
Another major contributor to the adoption of bitcoin by the company was the personal incentive for asset managers, investment committees and corporate finance chiefs. Remuneration drives behavior in financial markets. In December 2017, it imposed the stoic responsibility to reject crypto as the vector of money laundering and ominous activities. This time, however, the pendulum has swung to the other side, allowing professional allocators and wealth managers to point to the safest way to access bitcoin for investment mandates for stocks and multibates.
ITI observes bitcoin is an expansion of the investment phenomenon of the emerging markets. It is also a manifestation of the value of the internet. And so it goes without saying that social media and the cult of celebrity have also driven demand to some extent that is often misunderstood by traditional asset managers. In recent years, celebrities have reigned supreme, identified by the rise of the former US president.
Bitcoin has become an essential topic for all the technically savvy business leaders who use the network effect to spread their followers. Elon Musk’s Tesla announced it had spent $ 1.5 billion on bitcoin in January, boosting the currency by 17 percent. This news came days after Musk added ‘#bitcoin’ to his Twitter profile page – only to replace it with ‘Dogecoin’ shortly afterwards, which increased volatility for a few days. Tesla also acknowledged that future plans to accept bitcoin as payment for its products, which contributed very significantly to the acceptance of Bitcoin.
The “Celebrity” Dynamic
Michael Saylor, CEO of MicroStrategy, is the most influential American in Bitcoin. His company, a two-decade Nasdaq veteran, currently owns the largest corporate bitcoin grant in the world.
The reason Musk and Saylor had such an impact on Bitcoin is because of their credentials to support their rational and bold positioning. Musk is one of the richest people in the world, making him a leading authority for successful endeavors. Not only has its actions increased the number of retail investors seeking to earn a fortune on the volatile digital currency in the short term, but it has made bitcoin a much more attractive option for both corporate, institutional and traditional investors, which would be less than six months ago. did not go near bitcoin.
The difference between Musk’s tongue-in-cheek support of dogecoin and its support for bitcoin is that Tesla invests its treasury reserves in bitcoin. And so Tesla has joined a long list of technology giants that have accepted all cryptocurrency: Mastercard, Home Depot, Wikipedia and AT&T all accept cryptocurrency as a form of payment, and are probably the world’s most recognizable technology brand, Microsoft , has been accepting bitcoin for use in its online Xbox store since 2014 (with a short pause).
Thus, Tesla’s acceptance of bitcoin gave the long – term success of bitcoin more weight than any public tweet from Musk could do. At the time of this writing, rumors about Apple’s introduction to the cryptocurrency are gaining ground.
With the economic strife and devaluation of fiat currencies caused by quantitative easing by central banks in response to the COVID-19 pandemic, it is no surprise at all that small and corporate investors are in a hurry to invest in bitcoin. Judging celebrities from this fact has usually done little more than attract even more attention to the digital currency.
This is a guest post by Stephen Kelso. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.