LeboBTC Ledger Group’s 2020 Final Thoughts
2020 is almost over, thankfully. The physical, psychological and mortal toll imposed on the citizens of the world by COVID-19 dwarfs the misery of every non-major war year since the pandemic of 1918.
The economic damage yet to be tallied is certainly not reflected in stock market index prices which are near all-time highs around the globe. The law of unintended consequences will surely reign harshly on the choice to shutter the global economy to fight the contagion. Yet our human ability to quickly put the memory of pain and suffering behind us, along with the distribution of the COVID vaccine, offers hope for a better tomorrow and 2021.
THE SECOND INNING
The bull market (in stocks as well as Bitcoin) has evolved largely according to the script I outlined in April. Governments and Central Banks of the world have flooded the markets with unlimited money printing to make up for the COVID-led collapse in global GDP. Stock, bond and commodity markets, once bastions of free market capitalism, are now manipulated by the Central Bank policy of Modern Monetary Theory and limitless cash injections. The memes on social media state, “money printers go brrr”.
With interest rates indefinitely pegged at zero (or negative), investment capital has flooded to stocks, gold and Bitcoin. The question for investors is where are we in the cycle? My answer from the perspective of Bitcoin investment: we are in the second inning.
THE RAISON D’ETRE
Let’s briefly look at Bitcoin’s evolution. 2020’s bull market provided clarity for investors, solidifying the language of Bitcoin as an asset class. In 2017, there were two Bitcoin communities, one demanding a mandate for faster transaction speeds to compete as a digital alternative to fiat currency, the other seeing Bitcoin as a store of value independent of the global financial system. At a different moment in time there might have been synergy and compatibility to the projects (which seem on the surface to be complementary), but the communities forked, creating Bitcoin Cash (BCH) as an alternative to Bitcoin (BTC).
To this day, BCH remains a struggling cryptocurrency with a market cap of $6.5 Billion, whose raison d’etre fights with 8,000 other cryptos, trying to be a digital currency used in commerce. BTC, with a market cap of $500 Billion (at a price of around $27,000/BTC) has established itself as the dominant player in the cryptocurrency space. It has 69% market cap dominance over all other cryptos combined, with the singular purpose of acting as a store of value for its 100mm+ unique owners.
The emergence over the last 5 years of Ethereum and other project coins may ultimately have significant value and purpose, but they are all known as ‘alt coins’ and are distant in the rear-view mirror of BTC and its market cap. Ripple Labs (which created XRP, the 4th largest cryptocurrency by market cap) was just charged by the SEC for conducting an unregistered securities offering. This event has been seen by the crypto community as good news for Bitcoin, as BTC has been declared not a security by the SEC.
Bitcoin has become Gold 2.0 and it stands alone as a limited supply, anti-inflationary asset that can be sent cheaply, stored freely, traded liquidly 24x7, and can be bought or sold with truly marginal cost by anyone, anytime on the internet.
THE NEW ENTRANTS
The clarity of purpose and position of Bitcoin as Gold 2.0 has ushered in institutional adoption. 2020 saw investor luminaries such as Paul Tudor Jones, Stanley Druckenmiller, Bill Miller and Rick Rieder (Blockrock’s CIO) endorse Bitcoin as a store of value.
JP Morgan (whose CEO famously said in 2017 that he would fire anyone who invests in Bitcoin) recently wrote a research piece suggesting blueblood insurer MassMutual’s $100mm investment in Bitcoin could signal a further $600 Billion of institutional demand. PayPal and Square have enabled the use of Bitcoin on their platforms, and Pantera, one of the first Bitcoin funds, wrote a piece this past week suggesting that PayPal alone is taking out the entirety of annual new supply of Bitcoin.
All of that said, perhaps the most important (and unforeseeable) new entrants to the space are corporate treasurers. MicroStrategy, a NASDAQ-listed corporation helmed by CEO Michael Saylor, became the first corporate buyer of Bitcoin, announcing a purchase of $425mm this past August into their treasury reserves.
Saylor eloquently wrote that with the dollar as a negative store of value, he needed to protect his investors from future inflationary losses (as $1 ten years forward is worth $0.82). He stated that having looked at share buybacks, gold, and other alternative investments, Bitcoin stood out by far as the best place to protect reserves. Subsequent to its initial August purchase, MicroStrategy sold $550mm worth of five-year senior convertible debt with the express purpose of buying more Bitcoin. They currently own more than 70,000 BTC. Other corporations have followed MicroStrategy’s lead, but that move is in its infancy.
THE ACCELERATION POINT
The bottom line: Institutional adoption of Bitcoin has begun, but the needle has yet to move. As said above, the Bitcoin revolution spurred on by the global manipulation of all major markets and the fast and furious debasement of fiat currency, is in its second inning.
Bitcoin took out its 2017 high of $20k less than two weeks ago, and the current leg of this bull market has just started. The point for investors: you are not late to the game. Institutions are just beginning to sanction investment of financial assets into the very small space that is Bitcoin. We expect the first half of 2021 to see continued and perhaps significant acceleration.
Merry, Happy and Healthy to one and all. May 2021 shine brightly and heal the scars of 2020 past.
David & Jason Leibowitz
LeboBTC Ledger Group (LLG)
