Long on Bitcoin: Institutional Investment Driving Recent Crypto Bull Run
This past weekend, Bitcoin’s price reached nearly $50,000. While the end of 2020 and the first quarter of 2021 have seen astronomical moves for the prices of most digital assets, the bull run we are experiencing can be credited to the influx of institutional confidence that has been poured into the crypto market by some of the most influential companies in the world.
Incited by PayPal announcing their integration of cryptocurrency payments in October 2020, the institutional acceptance has been exploding. Since then, the largest institutional crypto allocations in history have taken place.
MicroStrategy, originally a business intelligence firm, has become a Bitcoin firm. The firm announced their first bitcoin purchase in August, locking in $250 million in BTC. Since then, the company has purchased Bitcoin more aggressively than any other company in the world, with $3.3 billion in holdings as of Friday – about 71,000 bitcoins. MicroStrategy CEO Michael Saylor commented in a statement on Bloomberg TV, “In an expansionary, monetary environment, you want scarce assets… The scarcest asset in the world is Bitcoin. It’s digital gold.”
And scarcity is becoming the universal sentiment. Bitcoin is the scarcest asset on the market with a widespread existential dilemma: everyone wants more of it, but there’s not enough left. With MicroStrategy leading the charge for institutional investment, companies worldwide are racing to secure their own Bitcoin. Just last week, Tesla announced an allocation of $1.5 billion towards Bitcoin, the largest single investment in the asset’s history. Tesla’s investment gave the token even more legitimacy, inspiring the recent bull run for Bitcoin and congruent tokens to the new all time highs reached over the past week.
While notables, MicroStrategy and Tesla are not the pioneers to this allocation. Crypto’s recognition is spreading across industries, from Wall Street to Hollywood celebrities. Guggenheim recently released a statement saying that they are considering a possible allocation of up to 10% of their $5.3 billion Macro Opportunities Fund. Alliance-Bernstein followed suit, saying the cryptocurrencies do have a place in asset allocation.
Not only are institutions investing, some are really getting in on the fun. JPMorgan recently announced their new digital asset branch, Onyx, as well as their new stablecoin, the JPM Coin, for interbank and worldwide transaction efficiency. Alongside JPMorgan, Fidelity Digital Assets is becoming one of the largest crypto custodying and lending companies in the game, with Goldman Sachs and similar entities following suit in providing digital asset services as well as blockchain development.
Of course, new all time highs are exciting, and they are blinding for any asset and its audience. But what’s different between the current bull run and 2017’s is that Bitcoin and cryptocurrencies are not experiencing as much volatility. Yes, Bitcoin’s price has the potential to rise and fall significantly everyday, but its value is holding up – its momentum and belief system is solidifying – and this legitimacy is stronger than ever before. These large corporations are giving crypto the validity that it needs to be widely accepted, which raises the question: if these renowned firms are investing, why aren’t you?