Institutional Money: A Blessing or a Curse for Crypto?
Let’s go back…
Not too far back…
Just a few years ago, actually…
Big Finance, lead by talking heads like Jamie Dimon, was doing its very best to shrug off Bitcoin and everything associated with it.
And media majors held on to their every word.
Bitcoin must have ‘died’ over a hundred times in 2017 alone…
That is…until institutions had a change of heart…And started jumping on board.
That was the catalyst that led to the first truly jaw-dropping crypto run. And Bitcoin soared from $4,000 to nearly $20,000 in just two months.
Bitcoin took over headlines on all major financial publications…
Big Banks were talking about starting their own trading desks…
Even companies listed on the biggest financial exchanges on the planet were cashing in…
Remember the Iced Tea company that jumped by 200% after adding blockchain to its name?
It was a wild time!
Then something weird happened…The news stopped…Bitcoin crashed…And everything laid seemingly dormant for a couple of years.
What happened to the institutions that were supposed to bring crypto into the mainstream? They got in…And they’ve been quietly accumulating their positions ever since.
Now, we’re seeing a similar story unfolding.
Prices skyrocketed again on waves of headlines suggesting the institutions were back, and ready to save Bitcoin…And then…Once again…Bitcoin shed as much as 50% of its value.
The hype beast is real…And so is the money flowing into the market
But what’s really happening behind the scenes?
As usual, the answer is a little bit complicated.
Let’s first look at who, exactly, is leading the latest bitcoin buying spree…
The GrayScale Effect
GrayScale Bitcoin Trust was the first…And arguably the most significant institutional player in the crypto realm…
Back in 2013, the company launched a brand new type of investment vehicle…
Allowing accredited investors exposure to the emerging crypto market through private placements.
And just two years later, GrayScale went public, marking another first for the industry.
It wasn’t until last year, however, that it became an SEC reporting company.
This was a massive shift in institutional interest in crypto because, for the first time ever, accredited and institutional investors had a vehicle with exposure to crypto markets that held the same tax advantages as traditional trusts.
Now here’s where it gets interesting…
In 2021 alone, GrayScale has purchased over 44,000 Bitcoin…
With the bulk of its purchases coming between January 9th and February 8th…
A brief period of consolidation for Bitcoin after a dramatic run at the end of 2020.
It was an inflow of nearly $1.7 billion into the market…
Sparking another rally in the price of Bitcoin.And it wasn’t the first time, either…
GrayScale loves buying the dip.
If you zoom out, you can see that the Trust has added nearly 300,000 BTC to its holdings over the past year…
Often in periods of consolidation.
But GrayScale isn’t the only giant throwing its weight around…
Since the beginning of 2021, financial giants have been slowly increasing their exposure to BTC…And much of it is centered around Michael Saylor’s software firm, MicroStrategy.
BlackRock, Vanguard, and Morgan Stanley are all among the top 10 holders of MicroStrategy…
And even Jamie Dimon’s very own JP Morgan bought into the BTC hype, launching its own basket of BTC-related stocks comprised of as much as 20% of MicroStrategy shares for its clients.
So why do all of these banks love MicroStrategy?
Well, my theory is pretty simple…It’s buying BTC. And a lot of it.
In February, the company bought over $1 billion in BTC…
In March, it bought a few million dollars more…
Just last week, MicroStrategy completed another $500 million private offering to buy even more.
And, well, I guess it went ok…Because a new SEC filing has revealed another private sale of its shares to purchase an additional $1 billion in BTC.
Now all of this may be difficult to unpack…
Especially if you weigh it against the headlines highlighting ‘the end of btc’, how bad it is for the environment, and how your investment in the crypto could disappear at any time.
But it’s pretty clear to me…Institutions love the stuff.
We’ve got GrayScale leading the charge, with over $25 billion in crypto assets under management…
BlackRock, a firm with over $8 trillion in assets under management gradually increasing its exposure to cryptocurrency…
Morgan Stanley, one of the world’s most influential banks diving in, as well…
And JP Morgan, the bank run by the world’s most vocal BTC hater launching its own crypto product…
And of course, MicroStrategy, whose private sales of shares to buy even more BTC are literally selling out within days of the initial announcement.
So what gives? Why the 50% drop? Are hedgies manipulating the market?
At the end of the day, Big Finance cares about one thing and one thing only…
Profit.
Pretty much any billion-dollar bank has been hit with charges for market manipulation, misleading customers, or straight-up fraud.
While blockchain technology offers something that traditional equities often don’t, transparency…
On-chain transactions are not necessarily what many of these firms are diving into.
Creating new investment vehicles, new products, ETFs, stocks all offer a less transparent way to gain exposure to the market…Often under the guise of “safety and regulation.”
But how nefarious are their intentions really?
They’re undoubtedly evil…
The reality is that we may never know to what extent they might actually be influencing the price of BTC…But the fact is, they’re buying it. And that means they’re expecting to profit from it.
In many cases…
It’s likely retail investors selling their holdings in times of fear, brought on by doomsday headlines and regulatory setbacks…And not necessarily evil hedge fund billionaires intent on squashing their biggest competition.
And Big Finance isn’t stupid.
Again, they have one goal…Profit.
And while it’s yet to be determined whether or not it will be a good thing for Bitcoin as a whole…It will likely be good for those who’ve taken their stake early.
