2020: The Year Bitcoin Went Institutional

Almost any way you shake it, 2020 has been a bad year. From COVID to economic depression and even the death of Kobe Bryant, this was one of the hardest years we have faced in our lives. However, Bitcoin has proven once again to be a glimmer of hope, and this time around it is the institutional investors are seeing the light.

An analysis conducted by Chainalysis last week revealed that a new wave of investors has flooded the market. "Investors who bought at least 1,000 bitcoins — worth over $23 million, and have had an account open for less than a year, have driven significant demand since September" the report concluded. The new group of investors bought over half a million worth of Bitcoin and accounted for $11.5 Billion worth of buy-side pressure which helped the price of Bitcoin more than double over the last 3 months.

This marks a stark difference from the last bull market of 2017 that was fueled primarily by retail investors. This time, we are seeing everything from payment processors like PayPal and Square, to tech companies like Microstrategy, to insurance firms like Mass Mutual all piling into Bitcoin and trading their USD balance sheet for Bitcoin. Legendary investors like Stanley Druckenmiller and Paul Tudor Jones have both jumped on the cryptocurrency bandwagon and highlighted its potential as a hedge against inflation. Sign-off from storied investors like these as well as the price prediction of $400K by Guggenheim Partners, make it easier for other institutions to jump on board. They opened the door for moves like the $744M investment made by Ruffer Investment Company last week. What we are seeing is a wave of institutional FOMO that is setting the Bitcoin price ablaze.

Michael Sonnenshein, Managing Director at Grayscale Investments, told CNBC Friday, "We are seeing institutional capital flowing in at the fastest pace in the history of our business, and it is being deployed by some of the world’s largest institutions and some of the most famous investors.” These institutions are driving up the price and sucking liquidity out of the market. Many of them plan to hold Bitcoin for years or even decades. As this liquidity dries up, and retail investors start to pile in, the rocket will truly take flight.