The pace of institutions entering the cryptocurrency market is significantly accelerating.
From Grayscale’s increase in cryptocurrency holdings by $1 billion, to 15 listed companies in the United States holding 600,000 BTC, to Coinbase holding cryptocurrency worth $110, and it is still growing rapidly, to the firm view of many Wall Street leaders Many, a new super bull market seems to be waving at us.
However, what have these large institutions that rushed into the cryptocurrency field brought to the crypto field? Why do they aggressively deploy the encryption field? Can these investments really be profitable?
Crazy blessing of institutions
This is an encryption feast, from Coinbase to Grayscale, from listed companies to institutional leaders.
As of mid-October, cryptocurrency exchange Coinbase had approximately 994,904 bitcoins in its cold storage, valued at more than $11 billion.
In addition to large institutions such as Coinbase holding a large amount of Bitcoin, listed companies in the United States have also bought a large amount of Bitcoin. According to the latest data from BitcoinTreasuries.org, as of now, 15 listed companies hold a total of 601,479 Bitcoins.
For example, MicroStrategy, a US-listed company, bought more than $250 million in BTC in August this year, and then again purchased $175 million in BTC in September. Currently, MicroStrategy has successively purchased USD 425 million worth of BTC (a total of 38,250 BTC twice).
Grayscale increased by 1 billion U.S. dollars a week, and the “Dollar Confidence Crisis” became an institutional layout. As a result, Grayscale is also accelerating its holdings of cryptocurrencies. As of October 22, the total scale of Grayscale’s asset management reached 7.3 billion U.S. dollars, which is an increase of 1 billion U.S. dollars from the 6.3 billion U.S. dollars announced on October 15, of which the number of Bitcoins reached 467,000.
It only took a week to increase holdings of $1 billion in cryptocurrency.
If you compare Bitcoin’s circulation, the result may be even more surprising.
At present, about 18,500,000 Bitcoins have been mined (including losses), and the total amount of gray-scale holdings of bitcoins has reached 466,591 BTC, accounting for 2.5% of the volume; however, if you count the lost 3 million bitcoins, gray-scale holdings account for The total circulation of BTC is as high as 3%.
Grayscale’s weekly increase of 1 billion US dollars, the “dollar trust crisis” has become an institutional layout. Therefore, according to Grayscale’s Q3 investor quarterly research report, these investor institutions account for 80% of the total. Individual investors, family trusts, and pension accounts The total investment of the participants is 20%.
This is the speed of the organization!
So, why would institutional investors crazily bless Bitcoin in the second half of 2020?
Why are institutions crazy to support Bitcoin?
In September 2020, the Norwegian Government Pension Fund, the world’s largest sovereign fund, with more than $1 trillion in assets under management, officially invested in cryptocurrencies.
According to a report by Arcane Research, the Norwegian government pension fund has realized its investment in Bitcoin by investing in MicroStrategy, a Nasdaq listed company. Currently, the pension fund owns 1.51% of the company’s shares and indirectly holds 577.6 BTC.
In this regard, Gemini co-founder Cameron Winklevoss commented that the increase in Bitcoin held by the Norwegian government pension fund shows that Bitcoin is becoming one of the mainstream allocation assets of global institutions and people are beginning to realize the importance of holding fixed-value assets. In particular, after the U.S. dollar gradually lost its status as a global sovereign currency, many investors began to seek changes, and the standard asset allocation ratio also entered a reshuffle stage. Safe-haven assets such as Bitcoin, gold and silver, including treasury bonds, were once again recognized by investors .
Therefore, institutions have aggressively entered the field of cryptocurrency to invest, with the purpose of hedging risks and avoiding the risk of holding US dollars.
Another reason stems from Bitcoin’s own security.
As the CEO of MicroStrategy, Michael Saylor tweeted in September that Bitcoin is 19.3 trillion times as secure as 10 years ago and 50 times as suboptimal assets. Gold is still as safe as it was in 1934.
The gray scale increased by 1 billion US dollars each week, and the “dollar trust crisis” became the main cause of the institutional layout of Bitcoin. In other words, the security of Bitcoin is constantly improving, and the improvement of gold in security has long been stagnant.
In addition, Saylor said in an interview that he hopes to obtain an asset that can invest $425 million and hold it for 100 years. Now, giving up the U.S. dollar is Saylor’s main concern, and he says he cannot afford the risk of inflation.
Regarding the reasons for investing in Bitcoin, Saylor said: “Our investment in Bitcoin is part of our new capital allocation strategy, which aims to maximize long-term value for shareholders. This investment reflects our belief that Bitcoin As the most widely adopted cryptocurrency in the world, currency is a reliable means of storing value and an attractive investment asset, which has longer-term appreciation potential than holding cash.”
So, these institutional investors can really make a profit when entering the game at such a rapid pace? From the analysis of historical data, this is not always the case.
Are organizations really profitable?
Investors often believe that institutional investors are wealthy and fully capable of manipulating the crypto market to obtain high profits.
However, this way of thinking is inaccurate or one-sided, because institutional investors may also face losses or even bankruptcy. Galaxy Digital is at the forefront of the “road to lose money” in cryptocurrency investment.
Grayscale increased by 1 billion US dollars weekly, and the “Dollar Confidence Crisis” became an institutional layout. The main reason for Bitcoin was Galaxy Digital was founded by billionaire and former Goldman Sachs partner Michael Novogratz. The company’s business scope mainly includes four major areas: cryptocurrency trading, asset management, entrusted investment and consulting.
With a resounding name and glamorous resume, it looks like a very good organization, but from the company’s report, Galaxy Digital is neither good at trading nor investing.
According to Galaxy Digital’s public financial report, except for the second quarter of 2018, the first quarter of 2019, and the second quarter of 2019, Galaxy Digital’s quarterly performance has always been at a loss.
For example, in terms of cryptocurrency trading, Galaxy Digital sold 1,226 Bitcoins in the first quarter of 2020, causing a loss of $38.2 million. In addition, Galaxy Digital’s USDC and USDT USD stablecoin holdings doubled from USD 5.98 million in the fourth quarter of 2019 to USD 12.8 million in the first quarter of 2020.
This is a “record” in terms of trading, and Galaxy Digital also performed mediocre in terms of investment.
In the investment field, Galaxy’s investment department invested $17.4 million into the ICO field, and ultimately lost 88%, while its investment in Xapo preferred stock was about $13.8 million, a loss of 70%. Galaxy Digital invested US$50 million in WAX in 2019 and ended up losing 96%.
Despite successive losses, the company has also made some successful investments, such as an investment of approximately US$3.7 million in preferred shares of BlockFi, which generated 283% of the return, and its US$900,000 investment in Cryptology, which generated a return of 902%. The investment of USD 500,000 in the initial period of NuCypher’s initial coin offering achieved a return of 852%. Unfortunately, the scale of these investments is much smaller.
Therefore, although institutional investors have vigorously entered the cryptocurrency market and are very lively, not every institution will eventually be able to make a profit. This really fulfilled the sentence, investment is risky, and you need to be cautious when entering the market.
