On December 16, a historic moment came, and the price of Bitcoin broke through $20,000, creating a record high.
Since its low point in March, Bitcoin has risen by more than 450% and has a market value of nearly $400 billion, surpassing Johnson & Johnson of the United States and ranking 14th in the global market value ranking of listed companies.
Ecstasy, incomprehension, doubt, curiosity, sneer…Bitcoin has become an angel in the eyes of some people, but also a devil in the eyes of others.
Why did Bitcoin break new historical highs, and where is the driving force behind it?
The cyberpunk moment of the dollar
“The most important factor for Bitcoin’s rise comes from the macroeconomic environment, which has created perfect conditions for Bitcoin to take off.” CoinShares Chief Strategy Officer Meltem Demirors said.
The macroeconomic environment mentioned here refers to the impact of the new crown epidemic. In order to save the stalled economy, central banks of various countries have started printing money madly, and the extent of currency release far exceeds the past century.
Morgan Stanley estimates that the balance sheets of the four major G4 central banks (the Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England) will expand to nearly $30 trillion by the end of next year.
Among central banks, the Fed’s balance sheet has expanded the most rapidly. Its expansion accounted for two-thirds of the total amount of central banks in the world. Statistics show that 21% of the total amount of dollars in history was printed in 2020.
The most direct impact of the currency release is the depreciation of the U.S. dollar. The U.S. dollar index has fallen by 12.46% from its March high and has fallen by 8% year to date.
Under the dual influence of the epidemic and the US dollar release, the world has entered a cyberpunk moment, just like the scene in “Cyberpunk 2077”, with skyscrapers and neon lights on one side, and slums and stinky drains on the other.
Illness, unemployment, work stoppage, high-interest borrowing, bankruptcy… the epidemic has wiped out the income of many people at the bottom of the United States for years of struggle.
At the same time, the stock market has become popular, the number of stocks that doubled on the day of the IPO hit a record high, and the total wealth of the rich with real estate and financial assets has continued to rise.
The report jointly issued by UBS and PricewaterhouseCoopers disclosed that in the four months from April to July, when the storm was at its peak, billionaires made a lot of money.
The total wealth of global billionaires surged by 30%, breaking through the US$10 trillion mark for the first time, far exceeding the 2017 peak of US$8.9 trillion.
The number of billionaires in the world has reached a new high. Among them, the United States is still the country with the largest number of billionaires in the world. The number of billionaires in mainland China increased to 415, a record high, and total wealth surged 41%.
In the era of currency floods, in order to avoid the continued depreciation of the dollar in the wallet, all the money was frantically looking for a way out, and various assets were soaring.
In the US stock market, there is also a money carnival. The stock market has never been a barometer of the economy, but a barometer of currencies.
The Nasdaq Index has repeatedly set new historical highs. Tesla has risen by more than 644% year-to-date, and its market value has exceeded 600 billion US dollars; Weilai Automobile has risen by more than 1011% year-to-date, and its highest increase has reached nearly 50 times since its low in March. It is more than the traditional star car company BMW.
In addition to the popularity of technology stocks, Bitcoin as an emerging super-sovereign asset has also been loved by rich and institutional funds.
As a non-sovereign, fixed supply, and anonymous asset, Bitcoin is opposed to the existing legal currency and credit system. It does not require trust in any existing institutions, is not easily controlled, and is not subject to existing State or institution intervention.
The collapse of trust in the existing system is an important reason for the increase in Bitcoin trust. Especially at the moment when the U.S. dollar continues to depreciate, Bitcoin has become a storage box for the U.S. dollar, a store of value, and is also called “digital gold.”
On December 15, in the “Global Fund Manager Survey” conducted by Bank of America/Bank of America Securities this month on fund managers, the top three most popular transactions were: long technology stocks, short US dollars, and long Bitcoin.
Institutional admission
Where does the biggest purchasing power of Bitcoin’s rise this year come from?
Looking back, institutional funds from the United States have become the main force of pull.
On December 11, the Wall Street Journal reported that MassMutual, one of the top five life insurance companies in the United States, has purchased $100 million worth of Bitcoin through the New York Digital Investment Group (NYDIG) for its general insurance account. .
Another crazy public company is MicroStrategy.
Previously, MicroStrategy’s main business was to provide business intelligence (BI) software to corporate customers, with lackluster performance and a loss of $1 million in 2019.
Beginning in July this year, MicroStrategy began to buy bitcoins on a large scale. Through several uninterrupted and continuous purchases, MicroStrategy spent almost all the funds on the books and exchanged US$475 million for 40,824 bitcoins. The current value is US$869 million. The profit is nearly 400 million U.S. dollars, more than the total profit of the past 5 years.
The CEO of MicroStrategy was not satisfied with this. On December 10, the official stated that it would formally issue convertible bonds worth US$550 million, and use the net income from the issuance of the bonds to buy Bitcoin. In layman’s terms, the bullet was empty and MicroStrategy started. Borrow money to buy bitcoin.
Speaking of the reasons for betting heavily on Bitcoin, MicroStrategy CEO Michael Saylor stated that “zero interest rates, opening the gate and the upcoming inflation will erode the US dollar. In the current environment, it is not prudent to continue to hold a large amount of US dollars.”
In his view, Bitcoin is the best carrier of value storage, far better than gold stocks.
Driven by investment performance, MicroStrategy’s stock price has risen steadily, from the lowest of $90 in March to the highest of $358, an increase of nearly 300%, despite its loss of $10.18 million in the third quarter of 2020.
However, analysts at Citibank adjusted the MicroStrategy stock rating to “sell” and recommended that its customers sell MicroStrategy stocks. The reason given was that the “excessive focus” on Bitcoin caused investors to face considerable At the same time, the company’s management is cashing out.
JPMorgan Chase’s news revealed that its president Phong Lee sold almost all of his stock.
In any case, listed companies have become a force that cannot be ignored among the big Bitcoin players.
According to statistics from Bitcoin Treasuries, there are currently more than 16 listed companies holding Bitcoin on the market.
In addition to MicroStrategy, it also includes Square, a payment company under the name of Twitter CEO Jack Dorsey. The company holds a total of 4709 BTC. Jack Dorsey is also a loyal fan of Bitcoin. In the Twitter profile, Bitcoin is used as a label.
Mingzhuang Grayscale
In addition to some publicly listed companies, there are also some mysterious wealthy individuals and institutions lurking underwater. Many of them hold positions in Bitcoin through Grayscale Investment. Grayscale Investment has also become the largest Bitcoin market in 2020.
Grayscale Investment itself is a trust company that relies on the issuance of GBTC, a Bitcoin trust product, to earn trust product management fees.
As of December 17, Grayscale Bitcoin Trust held 569,261 bitcoins, which was an increase of more than 61% compared with 351,754 six months ago (May 21).
In terms of mechanism design, investors can either invest in cash or contribute in kind (BTC) to hand over Bitcoin to Grayscale, and Grayscale deposits Bitcoin in the custodian Coinbase Custody, and at the same time issues equivalent bitcoins to investors Coin Trust shares GBTC.
The most ingenious point here is that due to regulatory reasons, GBTC is not allowed to be redeemed. Investors can only sell in the U.S. stock market (OTCQX) if they want to make a profit. Because GBTC is currently one of the channels that can legally participate in bitcoin investment. First, there is huge market demand, which makes the price of GBTC in the secondary market often have a premium of about 20% relative to the net value.
The increase in Bitcoin holdings of Grayscale Bitcoin Trust is equivalent to bringing strong buying, while reducing the selling of the Bitcoin spot market, transferring the selling pressure to the US stock market, and forming the driving force for the rise.
According to the data disclosed by Grayscale in the third quarter of 2020, the purchase users of Grayscale’s products are mainly institutional investors (81%), followed by qualified investors and family offices (8% each). 57% of purchase users come from outside the United States.
In the list of GBTC shareholders disclosed by Grayscale, there are many large institutions, such as the famous Rothschild Investment Corp (Rothschild Investment Corp) and the goddess of technology stocks, the female version of Buffett Catherine Wood’s Ark Investment (ARK).
Grayscale Investment provides a channel for institutional funds to purchase bitcoin in compliance, while PayPal has opened up the retail market for bitcoin.
On October 21, PayPal stated that due to the growing interest of central banks and consumers in digital currencies during the new crown pneumonia epidemic, the company will launch a cryptocurrency payment service: users will be able to buy, hold and sell cryptocurrencies through their PayPal accounts , And can shop at approximately 26 million merchants worldwide.
Blockchain hedge fund Pantera Capital analyzed that most of the new bitcoin supply in the daily market was bought by customers of online payment giant PayPal and the US version of Alipay Square.
In this way, in the macro-environment of the US dollar release, on the one hand, institutions are buying vigorously, and on the other hand, retail investors are entering the market one after another. Bitcoin broke through 20,000 US dollars and reached a new high.
