Bitcoin price has been soaring from record to record. And if 2020 has been the year of Covid-19, it has also been the year of Bitcoin. Indeed it is the year when Bitcoin has come of age. Chris Wood in Greed & Fear report is not only talking about Bitcoin price performance, though clearly that has been impressive with the cryptocurrency up 474% from the March lows and 214% year to date, including a 9.2% gain yesterday even while Greed & Fear was in the works! Significantly, what Greed & Fear means is that this is the year Bitcoin has become investible for institutions with custodian arrangements available and with prominent investors and indeed institutional investors declaring that they have bought it. One Bitcoin price today is $23,182.40.
In this respect, Bitcoin has now become part of the system with opportunities also for retail investors to buy into it via quoted vehicles, be it the Greyscale Bitcoin Trust in America or the recently launched VanEck Vectors Bitcoin ETN traded on the Frankfurt exchange.
This is important since, before such arrangements were in place, there was always the risk that Bitcoin accounts could be hacked. The other risk, of course, was that Bitcoin would be declared illegal because it was used for nefarious purposes, such as illegal narcotic transactions.
Then there was this surprise announcement in mid August and September by the Nasdaq listed MicroStrategy, a business intelligence software company, that it had invested in the Bitcoin equivalent of US $425 mn (US $250 mm in August and US $175 mn in September), amounting to almost 100% of its own treasury funds, to hold on its balance sheet.
The aim is to make Bitcoin “the primary treasury reserve asset on an ongoing basis”, along with cash and short-term investments, according to the company’s official US Securities and Exchange Commission (SEC) approved Form 8-K. MicroStrategy invested a further US$50m in Bitcoin in early December, with a cumulative holding of 40,824 Bitcoins.
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This marks a watershed moment in Greed & Fear’s view since the auditors approved MicroStrategy putting Bitcoin on its balance sheet. Now it is true that the far more famous Square also announced in October that it was investing US $50 mn in Bitcoin but that only amounted to 1% of the Silicon Valley Company’s assets. Such a small investment probably did not even have to be reported but in MicroStrategy’s case that was certainly not the case.