Whilst we try and make sense of the new normal, it is clear that crypto has triumphed in recent months, and a quick retrospective of 2020, so far, suggests that it is an asset class passed the point of critical mass.
The use of cash in retail settings has strictly declined; both as the majority of UK vendors had to shut up shop, and of course for hygiene reasons. There is a growing broad seated public distrust of traditional financial infrastructure, aided by the seeming unbridled printing of money by all major economies, and dwindling base rates. The world, it seems, is seeking a new ecosystem.
Blockchain technologies have been feted as a magic fix for industries as diverse as banking, gambling, logistics, healthcare and agriculture. Performance, year to date, suggests that crypto evangelists are on to a good thing. The FTSE 100, at the time of writing, is down 18%. By contrast, the blue-chip cryptos are enjoying phenomenal growth: Ethereum is up 196%, Bitcoin is up 52% and Litecoin is up 30%.
Diversification for retail investors is growing: the FCA reported in their research note that a not insignificant proportion of the adult UK population owns crypto assets — 5%, up approximately double from the previous year. Intriguingly the majority of this growth is in the older audience; 69% of crypto owners are over 35 years old — this audience is investment savvy, and has experience both of incoming new technologies and previous recession cycles. The main exchanges have noted increasing daily trading volumes over 2020.
By contrast, the blue-chip cryptos are enjoying phenomenal growth: Ethereum is up 111%, Bitcoin is up 30% and Litecoin is up 13%. Diversification for retail investors is growing: the FCA reported in their research note that a not insignificant proportion of the adult UK population owns crypto assets — 5%, up approximately double from the previous year. Intriguingly the majority of this growth is in the older audience; 69% of crypto owners are over 35 years old — this audience is investment savvy and has experience both of incoming new technologies and previous recession cycles. The main exchanges have noted increasing daily trading volumes over 2020.
Institutional investors, also, unsurprisingly, sitting up and paying attention. Paul Tudor-Jones, legendary Hedge Fund Manager went on record in May in praise of bitcoin as a hedge against inflation, and confirmed he holds just over 1% of his assets in bitcoin. Enthusiasm seems to be booming, with the world’s largest bitcoin investment trust, Grayscale, posting record inflows in 2020.
Founder Barry Silbert had pledged the fund would ramp up its purchases in Q2, and in late June, it is understood Grayscale purchased bought 19,879 Bitcoin (roughly $184 million worth) in one week alone, bringing its total number of coins to roughly 400,000. The firm now has $4.1bn assets under management, nearly doubled from $2.1 billion in May 2019.
Some of the world’s top investment teachers concur, and this is likely to trickle down to the retail audience. Indeed, Google searches of bitcoin peaked this year around the halving event. Author of the ‘Rich Dad, Poor Dad’ books, and previous enthusiastic Real Estate fan, Robert Kiyosaki has predicted that Bitcoin could be worth $75,000USD within the next 3 years, and that crypto will come to supersede gold and property as the future of finance.
The major platforms, also, seem to be accepting crypto-assets as part of our post-COVID reality.
Paypal, In a letter to the European Commission, PayPal has confirmed its long-suspected interest in cryptocurrency and distributed ledger technology. By providing crypto buying and selling to their 325 million platform users, and expanding the global audience, one can assume will have a positive effect on prices. Mastercard, in July was reaching out to crypto firms to encourage them to apply to become partners in its ever-growing cryptocurrency card program.
It was intriguing to note in the Twitter security breach of July, when hackers successfully hijacked 130 Twitter accounts, including those of Barack Obama, Elon Musk, Kanye West, Apple and Bill Gates, to tweet a fairly unsophisticated bitcoin scam. It is intriguing that the criminals perceived bitcoin to be significantly broadly understood to request the asset as a payment method.
Equally, despite an audience of hundreds of millions of followers viewing the tweets, a statistically insignificant number of transactions, thankfully, were made. Indeed, much of the crypto industry in the immediate aftermath were quick to highlight who distributed ledger’s technology is its strength: within hours of the hack, blockchain analysts had pieced together the hacker’s timeline and tracked the resulting bitcoin transactions.
I have a sneaking suspicion we look back on 2020 as a time where we ripped up the rule book to start again, and we will see it as a glorious summer for the crypto industry.
All views expressed in this blog are my own and do not represent the opinions of any entity with which I have been, am now or will be affiliated.