Institutional investors have become the largest group of bitcoin buyers because of the negative interest rate policy of central banks and the rising bitcoin price, according to Chris Vermeulen, founder of AlgoTrades Systems, a market technical analyst, trader and a financial author, writing in resourceinvestor.com.
Vermeulen claims central banks have proven to be a curse for global economies and their days are numbered because of new technologies and currencies.
Investors Escape Fiat Currencies
People are putting money into digital currencies rather than fiat currencies due to central banks’ negative interest and zero interest rate policies. This has caused bitcoin’s price rise this year.
Carlo Civelli, a billionaire resource investor, said central banks will not be able to get away with their monetary printing. The more they print, the more they drive investors away from fiat currency. Civelli said he could see governments telling people their money and bonds are worthless and that everyone has to “take a haircut.”
Because investors recognize this outcome, they are now the largest group of bitcoin buyers.
Jeremy Millar, who founded Ledger Partners in London, thinks family offices and hedge funds provide 50 to 80 percent of bitcoin’s $6.4 billion market capitalization.
Bitcoin Has Evolved
Millar told Reuters that over the past two years bitcoin has emerged from its “hacktivist” origins to an institutional ecosystem including traders, professional investors and hedge funds.
While a lack of regulation scared new customers, the Winklevoss twins gave the industry a boost with their Gemini bitcoin exchange.
Vermeulen pointed out that regulation did not help during the 2007 crash and it won’t help in the next crash.
Gemini is regulated in New York State and is regulated under banking law, so it operates under the same controls as any financial institution. This type of entity, when it began, was new to bitcoin.
The U.S. and European investors are joined by the Chinese in worrying about their currency, given the falling value of the yuan.
China Leads Bitcoin Investment
Zennon Kapron, the founder of Kapronasia, a financial technology consultancy and author of a book about bitcoin, said China is leading much of the investment in bitcoin, according to The Wall Street Journal, as people are converting yuan to bitcoin to protect their investments.
Chinese cryptocurrency exchanges OKCoin and Huobi have both have approximately 92% of bitcoin’s global trade.
Du Jin, chief marketing officer at Huobi, told The Wall Street Journal there is a lot of money in China that needs a place to go.
Tuur Demeester, an Austrian economist and investor, has stated that it is important to use bitcoin as part of a diversified portfolio, and that bitcoin counter balances the increasing risks associated with traditional investment practices.
Portfolios Should Include Crypto
Demeester noted in a report that a balanced portfolio includes investments in various blockchain technologies, including altcoins, with an emphasis on bitcoin. Such a portfolio can be a part of three separate strategies: as a calculated bet on early retirement, as a hedge fund in a speculative portfolio, and as an insurance policy.
Demeester added that returns of 100 times over 10 years are possible, while not guaranteed.
Vermeulen noted he is not a believer in owning fiat currencies for the long term, and that his emphasis is to locate “alternative” asset classes that are mature, but not yet saturated. “The risk-reward in such classes should be high,” he noted.
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Last modified: March 4, 2021 4:50 PM