Throughout this year, exchanges have reportedly been sending 19% more Bitcoin (BTC) transfers worth USD 1m or more, as investors are looking for a hedge against inflation and devaluation. (Updated at 14:24 UTC: updates in bold – Ruffer’s exposure to bitcoin currently totals over USD 740m, not USD 15m as previously stated.)
Bitcoin has recently been climbing, even scoring a series of all-time highs before correcting downwards. As Philip Gradwell claimed, the market is being driven by North American institutional investors, the chief economist at blockchain analysis firm Chainalysis, as Bloomberg cited.
He said the largest investors come from the region, while North American exchanges are getting net inflows BTC from other areas globally.
Gradwell cited in the report that,
“And the investors have been large — exchanges are sending 19% more transfers worth [USD] 1 million or more this year while bitcoin’s price has been above [USD] 10,000 compared with 2017 when it was trading above those levels,”
Notable companies, such as software company MicroStrategy and payments company Square, have now invested in the world’s number one crypto, as did some well-known individuals like hedge fund manager Paul Tudor Jones.
The most recent case of an investor looking for a hedge, UK-based Ruffer Investment Company, allotted 2.7% of its assets under management to bitcoin.
A Ruffer representative stated that “Ruffer’s exposure to bitcoin currently totals around GBP 550m [USD 744m].“
The spokesperson added that,
“In November, Ruffer gained exposure to bitcoin via a third-party specialist manager. This was primarily a protective move for portfolios. It diversifies Ruffer portfolios’ investments in gold and inflation-linked bonds, and it acts as a hedge to some of the risks that we see in a fragile monetary system and distorted financial markets.”
These are examples of firms that are “laying out the groundwork for how you add bitcoin to your balance sheet, how you should think about bitcoin as a substitute for cash,” Seth Ginns, a managing partner at an investment firm CoinFund, was cited by Bloomberg as stating.
Ginns also declared that there is “a lot” of interest from hedge funds in BTC and that a broader institutional adoption trend is likely to continue in 2021.
Crypto market analysis firm Coin Metrics also remarked that, though evading bitcoin as a risky asset, many institutions endorsed it in 2020.
Numerous investors find that the reason behind it is “the growing narrative that bitcoin could serve as a good hedge against inflation,” especially amid the COVID-19 pandemic, as well as the mixture of rising fiscal deficits and quantitative easing driving “federal banks to their limits” and creating “conditions that could lead to a significant inflation rate rise.”
On the other hand, bitcoin’s “predictable and transparent monetary policy is ultimately what makes it a good potential hedge against inflation,” stated Coin Metrics.
New bitcoins are distributed every time a new block is mined, signifying a predictable, transparent, and auditable supply schedule, and there is a limited supply of BTC.
Bloomberg claimed it should then come as no surprise that, in a poll taken in early December, some 15% of fund managers surveyed by Bank of America said that BTC is the third-most crowded trade. Shorting the USD is the second-most crowded trade, and “long tech” is the most crowded one.
Moreover, US senator-elect Market Insider quoted Cynthia Lummis as saying that she’s a hodler and that bitcoin is an excellent store of value that can help with the US national debt an “alternative path” should an initial plan to retire the debt fail.
Additionally, “if we reach the point where we have overspent so much that things start crashing down, the black swan event occurs with any regard to any fiat currency…there is a backstop available to every government in the world and that backstop is bitcoin,” stated Lummis.
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