This week bitcoin burst through $19 000 and is now within shouting distance of its all-time-high daily close of $19 397, which occurred in December 2017.
This puts bitcoin up over 47% in the past month, and more than 130% on a year-to-date basis. And that’s on top of its 91% return in 2019.
This is also reflected in the stellar returns in Revix’s Top 10 Bundle, which equally weights the 10 largest cryptocurrencies. Its two crypto theme-based bundles – which spread your investment across niche cryptos focusing on digital payments and smart contracts – are also well up in 2020.
“We’ve been wondering what it would take to catapult crypto into mainstream adoption and over the last few months we seem to have found the answers,” says Sean Sanders, founder of investment platform Revix, which is backed by JSE-listed Sabvest. “To say that the past month has been one of the most important in crypto’s history would be an understatement.”
Bitcoin’s latest price surge puts it ahead of traditional assets like gold (up 24%) and the S&P 500 (up 12%).
Several developments over the past month help explain bitcoin’s entry into the investment mainstream:
- PayPal – one of the world’s largest digital payment firms – announced that it would offer all 200 million-plus US users the ability to buy and sell five of the largest cryptocurrencies (including bitcoin, Ethereum, Litecoin and bitcoin cash) by the end of the year. This has the potential to more than double the number of global crypto investors overnight, estimated by the University of Cambridge to be around 100 million. The payment giant said that it would enable crypto payments at 26 million US merchants in the first quarter of 2021, which is a big first step for mainstream adoption.
- Square – the payments platform headed by famous Twitter CEO Jack Dorsey – announced that it had invested 1% of its total assets in bitcoin. This is an investment of around $50 million, or about 4 709 bitcoins. This follows a similar announcement by Nasdaq-listed MicroStrategy, which has invested a substantial percentage of its reserves into bitcoin, based on fears of the state of the global economy and the growing maturation of crypto as an investment avenue.
- JP Morgan, whose CEO called bitcoin a fraud just three years ago, published an in-depth feature in its flagship research series comparing bitcoin to gold, and saying its price could double or triple if current trends continue. Earlier this year, JP Morgan also agreed to provide banking services to crypto pioneer Coinbase as part of a broader entry to this market.
- Mode, a London-listed fintech and digital banking app, has adopted bitcoin as part of its treasury management strategy, becoming the first publicly-traded British company to announce a notable purchase of the cryptocurrency. Jonathan Rowland, Mode’s founder, said that once he started reading up on bitcoin, he realised its potential to be a global currency that becomes the “money of the internet”.
- Institutional participation in crypto hit an all-time high as measured by the number of large institutions – such as pension funds, endowments, family offices and hedge funds – holding significant positions in CME (Chicago Mercantile Exchange) bitcoin futures. Other well-known names like Fidelity Investments, Paul Tudor Jones II, Stanley Druckenmiller, and recently the $7 trillion money manager BlackRock, have touted bitcoin’s potential as the future of money, a hedge against inflation and a peer-to-payment system, an alternative to the US dollar.
Revix has had its own record-breaking month with thousands of new sign-ups. Record inflows from high-net-worth individuals and everyday investors looking to get started in the crypto space have started to accelerate.
“Despite the news headlines of positive crypto developments – a U-turn from just 12-months ago – for those of us working full time in crypto for several years, much of what has transpired this last month felt inevitable. We always believed that large institutions like PayPal would help normalise crypto for everyday use and institutional investors would come around to this new asset class,” says Sanders.
“What’s remarkable is that it all seems to be happening at the same time. This is becoming a reinforcing cycle, where positive adoption news – like that of PayPal entering the crypto space, or JP Morgan’s bullish outlook on crypto – puts pressure on other big-name payment institutions and financial firms to do the same.”
Where to from here?
The entire crypto market, up +160% this year, is now worth nearly $570 billion – which is higher than the valuations of Mastercard, Visa, Walmart, Johnson & Johnson and Nestlé.
The global pandemic this year has been a key driver behind the rise in bitcoin’s value. Revix saw investors with different motivations and appetites allocate the digital token to their portfolios this year.
“While we’ve seen big moves up in the crypto market over the last 12 months, these have been preceded by significant advances in institutional adoption, a clean-up in the regulatory space and the maturation of crypto service providers offering professional trading, custody and pricing,” adds Sanders.
“While cryptocurrency has now been around for more than a decade, it’s still ‘new’ in the grand scheme of things, and to many it’s still somewhat of an unknown investment class. At the same time, cryptocurrency is going to continue to evolve. The ways we use it, the ways we invest in it, and the different things it can accomplish are going to keep changing and expanding in the years to come.
“In the coming months, we expect to see large banks launch crypto custody services, and brokerages open up access to crypto products, to see more retailers displaying ‘We accept crypto’ signs, large institutions building major applications on public blockchains – and we expect investment conversations to transition from ‘Why should I invest?’ to ‘Why aren’t we already invested?’
“As with all new technologies, the journey for crypto will continue to have its ups and downs. Price corrections are to be expected and are healthy. But one thing is becoming clear: crypto is arriving now, and the time to get ahead of crypto’s mainstream breakout is starting to run short. The next six months are likely to change the game.”
Bitcoin is not a fad, and not being able to use it to buy a cup of coffee is not a reasonable argument, according to Sanders.
He continues: “In just 11 years, bitcoin has gone from nothing to an awe-inspiring creator of wealth. At this point, whether prices go to the moon or stagnate or correct, the cryptocurrency is becoming impossible to ignore in an increasingly dysfunctional global financial and monetary system.
“The growing involvement of major players in the financial services realm supports the staying power of the asset class and validates other people getting involved. I think bigger players understand better that buying bitcoin and putting it in their portfolio is meant to be a store of value, inflation hedge, a digital gold, a digital form of money that is much better suited to the digital world we live in today versus historical stores of value like gold, which would have been certainly much more applicable to a world characterised by physical exchanges.
“Bitcoin, and crypto more generally, is the evolution of money and what constitutes a store of value.”
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This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing please take into consideration your level of experience and investment objectives, and seek independent financial advice if necessary.