The institutional investors are here
Billionaire and hedge fund manager Paul Tudor Jones announced that his investment portfolio consists of 1 to 2% bitcoin. Wall Street veteran George Ball has also turned around and says he expects more and more investors to seek refuge in bitcoin. Meanwhile, interest in the investment fund Grayscale Bitcoin Trust (GBTC) has grown considerably and the fund now manages around € 4 billion in BTC. The institutional investors are not getting there; they are already there.
Much has been written and speculated over the years about the arrival of so-called 'institutional investors' and what effect they will have on the bitcoin market. Yet it increasingly appears that some of them are already there.
Paul Tudor Jones
For example, billionaire hedge fund manager Paul Tudor Jones recently told CNBC that he has invested 1 to 2% of his investment portfolio in bitcoin. Paul Tudor Jones is praised, among other things, for predicting the stock market crash of 1987 and according to Reuters, he is one of the 'great legends' of Wall Street.
Jones has been skeptical about bitcoin in the past, but says he has changed his mind because of the COVID-19 crisis and the 'huge monetary inflation' that resulted. With bitcoin we see the birth of a new store of value (a means for value storage) that can retain purchasing power better than regular currencies.
After all, central banks aim for an inflation rate of 2% per year for regular currencies, Jones explains. Whoever has regular (fiduciar / fiat) money therefore actually has something in his hands that is destined to lose value. This is in stark contrast to bitcoin, which has real scarcity and where the maximum amount of bitcoins is invariably set at 21 million bitcoin.
Bitcoin is a 'great speculation', according to Jones. But, he insists, it's only eleven years old and Bitcoin has yet to prove that it can stand the test of time. He therefore invests only a modest percentage of his portfolio. He does expect that the longer bitcoin continues to exist, the greater the confidence in it. He also says he wouldn't be surprised if bitcoin turns out to be his best-performing investment and he actually expects it to be, Jones said. A small percentage is not peanuts in the case of Paul Tudor Jones and his fund. Tudor Investments manages assets of about € 30 billion and Paul Tudor Jones himself is estimated to be worth about € 4 billion.
Wall Street veteran George Ball, former CEO of Prudential Securities and now CEO of Sanders Morris Harris, has also turned up. In an interview with Reuters, he said that many stock market investors are likely to be concerned about the consequences of the economic emergency measures. He expects many people to significantly adapt their investment portfolios to changing circumstances.
When asked what people can best invest their capital in, he replied that many people would look to bitcoin for a living. After all, the bill will have to be paid someday, he explains. According to him, this can be done through a tax increase or by printing new money, which can lead to inflation. Wealthier investors and traders will therefore turn to bitcoin `` or anything like it, '' Ball says. For the long term as an economic refuge, or for speculation in the short term. According to Ball, the upcoming Labor Day on September 7 could be a turning point.
Ball is also a former opponent of bitcoin, but now insinuates that he is a 'total convert'. He refers to JP Morgan's Jamie Dimon who used to be a fierce opponent, but who, according to Ball, is now a 'partial convert'.
Grayscale Bitcoin Trust
In the meantime, investment fund Grayscale Bitcoin Trust (GBTC) has been busy buying up huge amounts of bitcoin for some time. GBTC is a fund in which stock market investors can invest and Grayscale buys bitcoin with the funds raised. In this way, stock market investors can indirectly invest in bitcoin. And they seem to do that en masse. GBTC already managed some 125,000 BTC at the end of 2019, but in the first six months of this year that rose to 387,000 BTC. Since then, interest has not exactly waned, as in the two months after GBTC attracted even more investors and the fund grew from more than € 3 billion to more than € 4 billion in bitcoin under management. It is estimated that the fund now controls about 2% of the total maximum amount of bitcoin that will ever be there.
According to some reports, Grayscale even bought up more bitcoin during some periods than the total global production capacity of all bitcoin miners. Stock market investors thus seem interested in bitcoin and increasingly. An overview by Forbes shows that the largest investors in the fund are parties such as Ark Invest and Horizon Kinetic. Both have approximately EUR 4-5 billion in assets under management and slightly less than 1% of them invested in GBTC.
Some 'smaller' asset managers invested larger percentages. The most daring is Texas-based Corriente Advisors, which invested approximately 1.6% of the roughly € 200 million under management in GBTC. Arkadios Wealth Advisors with approximately € 500 million under management invested about 1.45% of it in GBTC. Other names also showing off the list of investors are IFP Advisors, Boston Private Wealth, Rothschild Investment Corp, First New York Investment Advisers, Heritage Wealth Advisors and Slatestone Wealth.
In slightly older news we find another name that may also belong in this list: George Soros. Shortly after the price of bitcoin collapsed by more than half in 2018, the billionaire is said to have given his investment fund Soros Fund Management permission to trade bitcoin. That was remarkable because during the World Economic Forum in Davos three months earlier, he called bitcoin a typical bubble. Bitcoin would also be especially interesting for dictators and tax evaders, Soros said at the time. Whether his fund has actually made investments in bitcoin is as yet unknown. A representative of Soros Fund Management declined to comment on this at the time. It turned out that Soros had bought shares in Overstock in February 2018. Overstock is a well-known name within the bitcoin community, because the online store was one of the first larger companies to accept bitcoin payments.
Adoption is likely to be a gradual process with no definitive turning point. Still, it seems less and less appropriate to say that the institutional investors are coming, when more and more of them turn out to be there. Opinions are divided as to whether this is a good or bad development. According to some, the advent of 'big money' has beneficial implications for price and social acceptance, but there is also concern that it might make the bitcoin market a plaything for big business and affect decentralization. Still, adoption by major institutional players is likely to be inevitable if global adoption is the end goal. And what people think of it doesn't really matter, because the bitcoin network is apolitical, a-moral, neutral and open to everyone. So also for institutional investors and large capital. Because of decentralization, nobody can do anything about it; that is the power of Bitcoin.