On Sunday (January 3), as Bitcoin celebrates its 12th birthday, it seemed like a good time to look back at ten of the most interesting events of 2020 from the point of view of Bitcoiners.
March 12: “Black Thursday”
On 12 March 2020, World Health Organization (WHO) announced that “COVID-19 can be characterized as a pandemic.” According to a Coinbase blog post published on 30 March 2020, worries about the economic impact of COVID-19 caused “a broad liquidity crisis,” which was “exacerbated by extreme leverage in crypto.” This resulted in Bitcoin suffering “the single largest one-day drop” in its price since 2013.
By the early hours (UTC time) of the next day, the Bitcoin price fell to $3600 on BitMEX, before the crypto derivatives exchange went offline for maintenance in order to recover from an alleged DDoS attack.
This put a pause on the cascading long liquidations, which allowed the Bitcoin price to quickly rebound above the $4,000 level.
May 7: Paul Tudor Jones’ Bitcoin Investment Thesis
On 7 May 2020, Bloomberg reported that legendary trader Paul Tudor Jones II (aka “PTJ”), the Founder and the Chief Investment Officer of asset management firm Tudor Investment Corp., had explained in a letter (titled “The Great Monetary Inflation”) to investors in the Tudor BVI fund that he sees Bitcoin as an excellent inflation hedge asset and that this fund “may hold as much as a low single-digit percentage of its assets in Bitcoin futures.”
Having someone of his stature endorse Bitcoin basically removed career risk for other institutional investors who might want to follow his footsteps.
August 11: MicroStrategy Announces Its First Investment in Bitcoin
On 11 August 2020, Nasdaq-listed business intelligence software company MicroStrategy Inc. (NASDAQ: MSTR) announced that it had “purchased 21,454 bitcoins at an aggregate purchase price of $250 million” to use as a “primary treasury reserve asset.”
Michael J. Saylor, Co-Founder, Chairman, and CEO of MicroStrategy, said at the time:
Saylor said at the time:
“Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively.
“Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty.
“We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.“
Roughly 4.5 months later, the MicroStrategy CEO revealed that his company was HODLing “an aggregate of 70,470 bitcoins purchased for $1.125 billion at an average price of $15,964 per bitcoin.”
October 8: Square Reveals That It Has Invested $50 Million in Bitcoin
On 8 October 2020, FinTech firm Square (NYSE: SQ) disclosed that it had invested $50 million in Bitcoin.
According to Square’s press release, Square had “purchased approximately 4,709 bitcoins at an aggregate purchase price of $50 million,” and it “believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose.”
Square’s announcement also mentioned that this investment “represents approximately one percent of Square’s total assets as of the end of the second quarter of 2020.”
November 6: William H. Miller III Says Bitcoin’s ‘Staying Power Gets Better Every Day’
Miller is the Founder, Chairman, and Chief Investment Officer of investment firm Miller Value Partners, as well as the portfolio manager of mutual funds “Opportunity Equity” and “Income Strategy”.
According to a report by Business Insider, after saying that Bitcoin has been “single best performing asset class” in the last one-year, five-year, and ten-year periods, Miller said:
“The Bitcoin story is very easy… it’s supply and demand… Bitcoin’s supply is growing at around 2.5% a year, and the demand is growing faster than that and there’s going to be a fixed number of them.“
Although Miller acknowleged Bitcoin’s price volatility, he believes that the chances of its price going to zero are much smaller these days:
“It’s been very volatile, but I think right now it’s staying power gets better every day. I think the risks of Bitcoin going to zero are much much lower than they’ve ever been before.“
Miller went on to say:
“I think every major bank, every major investment bank, every major high net worth firm is going to eventually have some exposure to Bitcoin or what’s like it, which is gold or some kind of commodities.“
November 9: Stanley Druckenmiller Explains Why Bitcoin Is a Better Inflation Hedge Than Gold
On 9 November 2020, American billionaire investor Stanley Freeman Druckenmiller, who was highly skeptical of Bitcoin as recently as last June, now owns Bitcoin as part of his investment portfolio.
Druckenmiller started his career as an equities analyst at Pittsburgh National Bank. Then in 1981, he founded investment firm Duquesne Capital Management, which had a positive return every year until he decided in August 2010 to quit the hedge fund business and close his firm.
During his interview with CNBC’s Kelly Evans, Druckenmiller admitted that he owned some Bitcoin as part of his investment portfolio (unfortunately, he did not mention the amount of BTC he is holding).
Here is Druckenmiller explaining why he now likes Bitcoin (even though he holds a larger position in gold):
“Bitcoin could be an asset class that has a lot of attraction as a store of value to both millennials and the new West Coast money — and, as you know, they got a lot of it… It’s been around for 13 years and with each passing day it picks up more of its stabilization as a brand…
“I own many many more times gold than I own Bitcoin. But frankly if the gold bet works, the Bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it.“
November 27: Guggenheim Funds Trust Considering Investing in Bitcoin
According to a U.S. SEC post-effective amendment filing made by Guggenheim Funds Trust on 27 November 2020, one of its fixed income mutual funds (“Macro Opportunities”) is considering investing in Bitcoin.
Guggenheim Investments is “the global asset management and investment advisory division of Guggenheim Partners and has more than $233 billion in total assets across fixed income, equity and alternative strategies.”
The SEC filing made on November 27 is known as an “SEC POS AM” (aka “post-effective amendment”) filing. This type of filing “allows a company registered with the SEC to update or amend its prospectus.”
This filing stated that the fund is considering getting some cryptocurrency exposure:
“Cryptocurrencies (also referred to as ‘virtual currencies’ and ‘digital currencies’) are digital assets designed to act as a medium of exchange. The Guggenheim Macro Opportunities Fund may seek investment exposure to bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust (“GBTC”), a privately offered investment vehicle that invests in bitcoin.”
December 10: Life Insurance Giant MassMutual Invests $100 Million in Bitcoin
On 10 December 2020, Massachusetts Mutual Life Insurance Company (“MassMutual”) announced that it had made a $100 million investment in Bitcoin and bought a minority stake in New York Digital Investment Group LLC (NYDIG).
MassMutual is a mutual insurance company (meaning that it is owned by the policyholders) founded on 15 May 1851. Therefore, its focus is on “long-term interests” of its members and participating policy owners. It is headquartered in Springfield, Massachusetts, and it employs around 10,614 worldwide (with roughly 7,000 of those based in the U.S.). As of 3 December 2019, its assets under management (AUM) stood at $567 billion.
According to MassMutual’s press release, the insurance giant bought $100 million in Bitcoin “for its general investment account in a transaction facilitated by NYDIG.” These bitcoins are “held on NYDIG’s secure, audited, and insured custody platform.”
December 15: Ruffer Investment
On 15 December 2020, UK-based Ruffer Investment Company Limited (“Ruffer”) announced that in November, the managers of the “Ruffer Multi-Strategies Fund” reduced the fund’s exposure to gold in favor of Bitcoin.
Ruffer is a closed-ended investment company incorporated in Guernsey, an island in the English Channel. It was funded in 1994, and it has around 6,600 clients worldwide., “mainly individuals and families, pension funds and charities.” As of 30 November 2020, it had £20.3 billion (or roughly $26 billion) worth of assets under management (AUM).
According to a Portfolio Update notice published on the website of the London Stock Exchange (LSE), the managers of Ruffer’s Multi-Strategies Fund made a defensive move, reducing the exposure to gold and adding exposure to Bitcoin, and the size of this exposure is “currently equivalent to around 2.5% of the portfolio.”
The next day, journalist Zack Voell wrote in a report for Coindesk that a spokesperson for Ruffer Investment had clarified (via email) an important statement in the company’s portfolio update memo to shareholders.
More specifically, this person told Coindesk that the 2.5% figure mentioned in that memo was referring to the percentage of the firm’s AUM that represented Bitcoin exposure. In fact, he/she said that currently Ruffer’s Bitcoin exposure “totals around £550m, equivalent to around 2.7% of the firm’s assets under management.”
December 16: Guggenheim Partners’ Global CIO Says Bitcoin Price Should Be $400K
On 16 December 2020, Scott Minerd, Global Chief Investment Officer of Guggenheim Partners, “a global investment and advisory firm with more than $295 billion in assets under management,” gave his long-term price target for Bitcoin.
Minerd is a founding Managing Partner at Guggenheim, where has worked for the past 22 years. Before Guggheim, he was “a Managing Director with Credit Suisse First Boston in charge of trading and risk management for the Fixed Income Credit Trading Group.”
During an interview on Bloomberg TV, Minerd was asked by Scartlet Fu, Bloomberg TV’s Senior Editor of the Markets Desk, about the Guggenheim Macro Opportunities Fund and the decision by its managers to invest “up to 10% of its net asset value in Grayscale Bitcoin Trust.” In particular, he was asked if Guggenheim had started buying Bitcoin yet and how much this decision was “tied to the Fed’s extraordinary policy.”
“To answer the second question, Scarlett, clearly Bitcoin and our interest in Bitcoin is tied to Fed policy and the rampant money printing that’s going on. In terms of our mutual fund, you know, we are not yet effective with the SEC. So, you know, we’re still waiting.
“Of course, we made the decision to start allocating toward Bitcoin when Bitcoin was at $10,000. It’s a little more challenging with the current price closer to $20,000. Amazing, you know, over a very short period of time, how big run-up we’ve had, but having said that, our fundamental work shows that Bitcoin should be worth about $400,000. So even if we had the ability to do so today, we’re going to monitor the market and see how trading goes, what evaluation that ultimately we have to buy it.“
Minerd was then asked how why he believes the Bitcoin price could reach $400,000.
“It’s based on the scarcity and relative valuations such as things like gold as a percentage of GDP. So you know, Bitcoin has actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transaction.“
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.