Has BTC matured to be a safe investment play?

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Bitcoin has often been referred to as the “digital gold” of the 21st century. However, is the cryptocurrency really reliable as a new safe haven against financial uncertainty and inflation? The question is difficult to answer, but the actions of a number of key institutions and the opinion of a few well-known investment managers suggest that Bitcoin (BTC) is becoming more attractive as a hedge against these fears.

Business analyst MicroStrategy has spearheaded the institutional burden on Bitcoin for the past six months, buying more than $ 1 billion worth of BTC after the cryptocurrency was introduced as the primary treasury reserve asset. The company now holds approximately 70,784 BTC.

Michael Saylor, CEO of MicroStrategy, made it very clear in his claim that the standout cryptocurrency is a superior store of value over fiat money, and he has placed his bitcoin where his mouth is since August 2020.

Meanwhile, Grayscale Investments has been sucking Bitcoin for the past few months and firmly establishing itself as the largest digital asset manager in the world. According to the company’s latest data, Grayscale’s Bitcoin holdings contribute significantly to the overall portfolio with around 648,000 BTC worth over $ 20 billion.

Following in the footsteps of these proverbial Bitcoin pioneers, SkyBridge Capital launched its own Bitcoin fund in December 2020. Skybridge was founded by American financier and former White House communications director Anthony Scaramucci, who has made some very optimistic statements about the future of Bitcoin as a safe company. Port asset.

Scaramucci and SkyBridge manager Brett Messing penned a comment published by CNN portraying BTC as an increasingly attractive option for long-term investors seeking protection from inflation. The couple said that increased regulation, infrastructure and financial institutions offering exposure to cryptocurrencies have “made Bitcoin investments as safe as owning bonds and commodities like gold, which are also used to balance portfolios”.

Bitcoin and the wider cryptocurrency space have once again been brought back to mainstream awareness as BTC, Ether (ETH) and other altcoins have hit all-time highs in the past two months. It remains to be seen whether Bitcoin will actually become less volatile and live up to the hopes of Scaramucci, Saylor, and others who are turning cryptocurrency into a new age safe haven asset.

Change perceptions

There is an overarching feeling that the current cryptocurrency boom is inherently different from previous periods of significant growth. Due to institutional interest, cryptocurrencies seem to be becoming a more serious investment for individuals and institutions alike.

Pavel Matveev, CEO of cryptocurrency payments company Wirex, told Cointelegraph that perceptions of Bitcoin may change, although the company continues to be known for its extreme price volatility.

Matveev said the price of Bitcoin is still three times more volatile than the S&P 500 index, while recent changes in value have been driven by macroeconomic factors like the COVID-19 pandemic and the resulting fiscal measures taken by governments to deal with the situation:

“The most volatile drivers of the BTC price were limited supply and booming demand from institutional investors. Apart from that, the QE measures and the environment with low to negative interest rates have increased liquidity to historical levels. Of course, the decision for a company to allocate a small portion of the treasury funds in a rally bitcoin when the greenback’s value collapses is natural. “

A relevant question for many is whether Bitcoin and other cryptocurrencies like ether will become more trustworthy and long-term given the ongoing economic uncertainty. Matveev noted that institutions, which are typically long-term owners, have made informed decisions when looking to invest in BTC.

Bitcoin’s positive track record in long-term appreciation was a driver of interest from the institutes, and Matveev also noted that some publicly traded payment companies have committed to incorporating Bitcoin into their core activities, further adding credibility to the performance of the BTC price. However, he admitted that this “does not change the high market volatility of Bitcoin in the short term” but at least makes it a suitable investment.

Kris Marszalek, CEO of Crypto.com – a publisher of exchange and crypto cards – pointed out to Cointelegraph the impact of institutional investments on the cryptocurrency markets, suggesting that their continued involvement could balance the room: “Investing in bitcoin is unlike 2017 when it was mainly run by retail and therefore exposed to more dramatic market movements. ” He added:

“Today at MicroStrategy we see big investors like Michael Saylor who have taken large Bitcoin positions with a long-term thesis-based approach. A big part of their thesis is that BTC is not only a hedge against inflation, but also a better hedge than gold. Their size and thesis could give the Bitcoin market more stability in the long term. “

Marszalek also highlighted the fact that some well-known traditional financial asset management firms such as Fidelity and JPMorgan Chase are advocating that clients have a 2% to 5% cryptocurrency risk in their portfolios. He believes it’s evidence that the tide is changing: “There’s no doubt that the perception of BTC has turned a corner. As a result, BTC is safer than it used to be as a long-term hedge, but like any other investment, it carries a risk. “

Regulation plays a role

With interest in the space continuing undiminished, questions about regulation are still an important point of discussion for the possible long-term introduction and appreciation of cryptocurrencies. Wirex’s Matveev agreed that regulation could well have an impact on whether cryptocurrencies are considered conventional, long-term investments for the next few years, adding:

“As with all investments, there is some risk so it would be wrong to say that every investment is 100% safe as the markets are constantly changing, but I think public opinion is starting to see crypto as a great alternative too regular payments. “

The renowned hedge fund manager Ray Dalio was also involved in the Bitcoin conversation in a personal post on LinkedIn at the end of January. Dalio is known as an advocate of gold as a long-term investment and store of value. In his essay, which he wrote to avoid “media misinterpretation”, Dalio described a number of reasons why he considers Bitcoin an “alternative gold-like asset”. At the same time, Dalio believes that the limited supply of Bitcoin is a point of contention as other cryptocurrencies that play a similar role could negate the limited supply.

While noting the apparent success of Bitcoin as a new invention in the decade since its inception, Dalio also highlighted the fact that governments and banks will not simply allow a competitive system to disrupt their control of the global economy, especially when it comes to it The privacy goes’ that Bitcoin offers users:

“I have a hard time imagining that Bitcoin (or gold) would be an obviously better choice than the money and credit it produces. I suspect that Bitcoin’s greatest risk is to be successful because if it does, the government will try to kill it and they have a lot of power to succeed. “

Marszalek operates in multiple countries and has direct experience working with regulators. He highlighted his base in Malta as a prime example of the potential benefits of clear, fair regulatory parameters: “2020 was a year in which the regulation of cryptocurrencies made good progress. […] Malta is one of the few jurisdictions in the EU that has developed a clear regulatory framework for digital assets to protect investors. “

While the outlook for Bitcoin and the cryptocurrency markets is very positive, there are still risks associated with investing in this area. The cryptocurrency market is still in its infancy, and as highlighted above, there are still some areas that need to be addressed before Bitcoin and other cryptocurrencies become proven long-term investments.