This week we look at further institutional support for bitcoin, what a Biden presidency could mean for crypto, and $1 billion worth of BTC coming back into the market
Despite the U.S. election keeping investors on edge, BTC began a rapid ascent from sub-$14,000 levels to a high of $15,975. The market pushed higher on expectations of former Vice President Biden winning the election. The likely thesis there was that a Biden presidency would result in more fiscal stimulus than a second Trump presidency.
But since reaching those highs, price action has been muted. Bitcoin has formed a short-term range between $14,500 and $16,000, tapping both the highs and the lows twice as the uptrend slows.
Over the past few days, it appears the market has been reacting well to a Biden presidency, while also riding Monday’s news of an extremely successful Pfizer vaccine trial. Bitcoin’s price action this past week formed a remarkable inverse correlation with the U.S. Dollar Index (DXY). Bitcoin further diverged from the performance of the stock market this past week, stagnating as the S&P 500 moved towards its all-time highs.
While there remains uncertainty around the election and COVID-19, analysts are confident about the long-term prospects of the asset. Just this past week, legendary Wall Street investor Stanley Druckenmiller announced that he owns bitcoin, calling it a better inflation bet than gold.
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- Bitcoin experienced a strong rally this past week in spite of election uncertainty.
- After consolidation under $14,000 early last week, the coin flipped that level into support.
- Bitcoin currently trades for $15,458, though traded as high as $15,975 late last week.
- The fundamentals of the leading cryptocurrency continue to improve, with institutional players continuing to enter the space.
- One of the world’s most prominent money managers, Stanley Druckenmiller, said that he thinks Bitcoin is a better inflation bet than gold.
- The U.S. government has seized $1 billion in bitcoin, which they will need to liquidate.
- OKCoin has a big announcement coming! Great ready to expand your portfolio. We’ll be sharing our announcement next week.
Here’s your market snapshot:
All prices are in USD and time zones are PT. Prices are as of 11:30am PT.
Stanley Druckenmiller, “the world’s best asset manager,” announces support for bitcoin
This week we learned that Stanley Druckenmiller, a Wall Street billionaire, is now long on bitcoin. Druckenmiller is widely regarded as one of the world’s best macro analysts, having been a lead portfolio manager for George Soros and making his investors an average of 30 percent a year.
When asked about his thoughts on the economy in a Monday interview with CNBC, he mentioned bitcoin as an asset class to watch.
First and foremost, he noted that millennials and “west coast money” are increasingly branding bitcoin a store of value. He added that “they got a lot of it,” seemingly referencing how much bitcoin more tech-minded investors own. For instance, Silicon Valley venture capitalist and Virgin Galactic chairman Chamath Palihapitiya once held 5% of all BTC in circulation.
Secondly, Druckenmiller admitted that he thinks bitcoin may “work even better” than gold as a bet on inflationary trends. He thinks that there are macroeconomic trends that show the U.S. dollar will drop in the years ahead, which should boost both gold and bitcoin.
The investor, who has a net worth of over $4 billion, did not disclose what price he bought bitcoin at, or what percentage of his portfolio the cryptocurrency comprises. Still, many in the space see this as a decisive win for the bitcoin bull case.
Raoul Pal, CEO of Real Vision and a friend of Druckenmiller, said:
“The significance of the world’s greatest and most respected money manager – Stan Druckenmiller saying just now that he is long bitcoin can not be overstated. That has removed every obstacle for any hedge fund or endowment to invest…”
Pal is referencing the career risk of investing in bitcoin. For years, bitcoin has been seen as a fringe investment by most investors; JP Morgan CEO Jamie Dimon famously said that he would fire anyone in his company that was dealing in bitcoin.
Druckenmiller revealing that he thinks Bitcoin is a viable investment—one maybe even better than gold—goes a long way in “removing every obstacle” for investors that want in, as Pal put it.
Druckenmiller is the latest Wall Street billionaire to have given Bitcoin his stamp of approval.
Previously, it was Paul Tudor Jones, one of Druckenmiller’s friends on Wall Street. Tudor Jones is a big proponent of gold. Though, like his peer, he thinks that bitcoin makes even more sense as an investment here than the precious metal. Tudor Jones wrote in his famous May research note:
“I am not an advocate of bitcoin ownership in isolation, but do recognize its potential in a period when we have the most unorthodox economic policies in modern history.”
He added more recently that he thinks that investing in bitcoin now is like investing in Google or Apple early on in their lifespans.
Other notable supporters include CEO of Fidelity Investments, Abigail Johnson, and fund manager Bill Miller.
Don’t get left behind, dollar-cost average into your BTC position
Institutional investors are moving quickly into bitcoin, but OKCoin has a feature that helps everyone else grow their BTC position. For investors who want to build their crypto portfolio over time, dollar-cost averaging (DCA) is a great way to do it. OKCoin just launched a recurring buy tool to make this easier, and has the lowest retail fees in the industry so you don’t have to worry about charges.
Dollar-cost averaging into your position is a great way to profit from a long term trend that is volatile, by investing a small amount at a time. If the price goes down, you can increase your total investment and automatically lower your average cost. If the price moves continuously upward, it would result in lower gains compared to going all-in from the start, but gives you exposure to an increasing price trend. This is an easier way to ensure you get exposure to price increases as they happen, rather than waiting to enter the market and missing out.
Loud critics remain
While Bitcoin has an increasing share of supporters, there are still cynics.
Nouriel Roubini, a New York University professor and economist, recently doubled down on his sentiment that bitcoin is a scam. The economist, who was nicknamed ‘Dr. Doom’ after calling the 2008-09 recession, wrote on Twitter this week:
“Bitcoin is NOT a currency: it is not a unit of account, it is not a single numeraire, it is not a scalable means of payments, it is not backed by any asset, it is not legal tender, its price is highly manipulated & thus its partial store of value function is based on nothing.”
He added in an interview with Yahoo Finance that he thinks central bank digital currencies (CBDCs) are superior to bitcoin.
Professor Steve Hanke of John Hopkins also riled up the bitcoin community when he said that the cryptocurrency is “highly unstable and speculative”:
“Bitcoin has recently outpaced stocks, gold, & other assets. It’s currently trading near three-year highs. Just more evidence that BTC is nothing but a highly unstable & speculative asset- NOT A CURRENCY.”
$1 billion in Silk Road Bitcoin seized by U.S. government
Last week, on-chain analysts noticed a weird transaction: $1 billion worth of Bitcoin that had not been moved since 2014 had suddenly been transferred to a new address. The price of BTC immediately dropped by approximately $150, or around 1%, as some feared that those coins were going to be sold off.
Confusion persisted until a few days later, the U.S. Department of Justice revealed that it was the entity behind the transaction. They managed to convince an unnamed hacker who had possession of the coins, “Individual X,” to hand them over. It is unclear who this individual is, or what deal they got for handing over these coins.
The coins were sourced from Silk Road’s wallets. Silk Road was the dark web marketplace run by early bitcoin adopter Ross Ulbricht, who is now serving two life sentences in prison.
There are still many unknowns about this case, but it could be that the DOJ or another government agency will be mandated to auction off these coins to the public.
Crypto-asset analyst “Light” commented that this is likely to be a bearish event due to it representing an influx of supply into the market:
“Utterly fascinating to read – the BTC stolen from the Silk Road was iron handed by the hacker from a value of $354,000 to $1,000,000,000+. Now it has entered the supply side. Material net negative, even if institutional buyers are eager and willing.”
Of note, the auction(s) that may come from this seizure may actually represent a way for institutions to easily acquire exposure to Bitcoin, at potentially a lower cost than the market price.
Silicon Valley investor Tim Draper, for instance, participated in the previous Silk Road bitcoin auction, spending $14 million on thousands of coins. These auctions basically represent an over-the-counter transaction facilitated by the U.S. government.
Bitcoin will have an inside man in the Biden administration
Assuming Biden takes control of the White House in January, bitcoin will have an inside man in the administration.
Last week, the Wall Street Journal reported that Gary Gensler, the former chairman of the CFTC and an MIT professor, was going to be tapped by the Biden administration. Today, Gensler was formally asked to be an advisor to the administration regarding the Federal Reserve and other financial regulators in the U.S.
What makes this bullish for Bitcoin is Gensler is a known as a bitcoin bull, having written articles for outlets in the space and working with the MIT Digital Currency Initiative. Gensler wrote last year in an op-ed for CoinDesk:
“I remain intrigued by Satoshi’s innovation’s potential to spur change – either directly or indirectly as a catalyst. The potential to lower verification and networking costs is worth pursuing, particularly to lower economic rents and data privacy costs, and promote economic inclusion… Even in this slightly less ambitious form – acting as an innovative irritant to incumbents and traditional technologies – cryptocurrencies and blockchain technology have already prompted real change and can continue to do so.”
It’s worth noting that bitcoin and cryptocurrencies at large do have other supporters within the ranks of the government.
The acting Comptroller of the Currency, Brian Brooks, recently told a U.S. Senate committee that cryptocurrencies have become a viable medium of exchange owned by millions of Americans:
“These figures clearly illustrate that this payment mechanism is now firmly entrenched in the financial mainstream. Cryptocurrency has become a popular mechanism for sending and receiving payments for goods and services because transactions post in real time and provide convenience and security.”
Brooks’ office, better known as the OCC, is responsible for regulating and supervising all national banks and the branches of foreign banks in the U.S.
The current chair of the CFTC, Heath Tarbert, is also a fan of bitcoin and ethereum.
Short-term bitcoin on-chain trends mixed
IntoTheBlock, a blockchain analytics firm, reports that Bitcoin remains “mostly bearish” despite the upward price action. Three out of seven of its core metrics are currently in “bearish territory.” These are net network growth, large transactions, and the bid-ask volume imbalance. Only one of IntoTheBlock’s core metrics are “bullish”: the rest are “neutral.”
While the immediate on-chain trends for Bitcoin are negative, analyst Willy Woo sees longer-term bullish trends for the leading cryptocurrency.
He wrote a number of days ago that this is the “most organic” pump in the Bitcoin price he’s seen “in years.” Woo pointed to the increase in the number of Bitcoin users and a large influx in withdrawals from exchanges, which suggests investors are holding their coins for the long haul.
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