Fidelity Calls Bitcoin an ‘Aspirational’ Store of Value and an ‘Insurance Policy’

Bitcoin is an aspirational store of value according to Fidelity Digital Assets.

Fidelity Digital Assets, subsidiary of multi-trillion dollar investment firm Fidelity Investments, views Bitcoin (BTC) as an “aspirational store of value” and an “insurance policy” against a troubled financial system according to a new report.

Fidelity holds over $8 trillion in assets and its digital assets arm launched in October 2018.

Bitcoin is an “aspirational store of value”

The report, Bitcoin Investment Thesis: An Aspirational Store of Value, notes that Bitcoin meets the basic test for being considered a store of value but hasn’t achieved that status yet:

“Many investors consider Bitcoin to be an aspirational store of value in that it has the properties of a store of value but has yet to be widely accepted as such.”

The core components which drive its potential as a store of value lie in the “decentralized settlement network and its digitally scarce native asset”. Bitcoin’s volatility, often used in counter arguments against Bitcoin being a store of value, can be considered beneficial to adoption as it “attracts attention, development and innovation” the report says.

According to John Pfeffer of Pfeffer Capital LP, who is quoted in the report: “Most people in the world don’t yet see Bitcoin as digital gold. As soon as people see it in a different way, the price will adjust”.

Bitcoin is an “insurance policy”

The report also makes reference to the concerns around money printing as a result of the COVID-19 financial crisis and suggests that some are losing trust in traditional economies:

“The unknown consequences of record low interest rates, unprecedented levels of global monetary and fiscal stimulus and deglobalization are all adding fuel to the fire of awareness and adoption.”

John Vincent of Wakem Capital Management made reference to money printing in light of the recent Bitcoin block reward halving. “You don’t need to be a PhD to understand that the number of dollars just doubled whereas the BTC supply just halved,” he said. 

Another catalyst for adoption the report notes is the transfer of wealth from the older generation to a younger demographic as “younger people view Bitcoin more favourably”.

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Grayscale Hasn’t Bought A Single Bitcoin in Over 3 Weeks

For several months, Grayscale was buying more Bitcoin than was being mined, but this trend came to a screeching a few weeks ago.

Given the rate at which Grayscale usually buys Bitcoin, it seems like the cryptocurrency fund management company was trying to buy every single Bitcoin in existence. But this pattern ground to a halt more than three weeks ago and hasn’t picked up again since.

Grayscale Bitcoin Trust Fund (GBTC) would typically file a Form 8-K with the Securities and Exchange Commission (SEC) on a weekly basis, declaring its latest Bitcoin acquisitions. But the last time such a report was filed was June 25, when the company disclosed the purchase of almost 20,000 BTC. According to its second quarter report, GBTC was raking in an average of $57.8 million a week in investments.

A Grayscale spokesperson told Cointelegraph that the halt in BTC purchases is temporary, and is due to an administrative quiet period:

“There was an administrative quiet period for the Grayscale Bitcoin Trust private placement. The Trust is now open for subscription as of Friday, July 10 at 4:00pm ET.”

In any case, Grayscale has not issued any SEC disclosures about new Bitcoin acquisitions since then.

Grayscale is indicative of institutional interest in Bitcoin

It is important to note that GBTC is not a hedge fund that buys assets on the expectation of profiting from them later. Instead, it buys Bitcoin whenever investors buy its shares. Currently, each share corresponds to 0.00095891 BTC. 

In the second quarter, 84% of the investments into Grayscale came from the institutional investors, mostly hedge funds. Thus, this reversal is indicative of the institutional interest in the asset. The company itself was boasting of its prowess, buying more Bitcoin than was being mined:

“After Bitcoin’s halving in May, 2Q20 inflows into Grayscale Bitcoin Trust surpassed the number of newly-mined Bitcoin over the same period. With so much inflow to Grayscale Bitcoin Trust relative to newly-mined Bitcoin, there is a significant reduction in supply-side pressure, which may be a positive sign for Bitcoin price appreciation.”

Why did institutional investors stop buying?

There are at least a couple of possible explanations to this sudden pullback. One is seasonal — July tends to be a slow time for investment activity. Many asset managers travel or take vacation. Another reason could be that Bitcoin hasn’t done much in the last few months. 

Bitcoin weekly price chart (Coinbase)

Bitcoin weekly price chart (Coinbase). Source: TradingView.

While its rapid recovery in the wake of Black Thursday attracted a lot of attention from investors who were getting hammered in traditional markets, and were troubled by the uncertainty from unparalleled stimulus packages. But starting in early May, Bitcoin has been stuck in an “undecided” mode. There are plenty of less-mysterious assets that can do the same thing.

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There Are Over 13K Bitcoin Addresses Worth $1M

Over 13,000 Bitcoin addresses hold over $1 million worth of Bitcoin.

There are over 13,000 Bitcoin (BTC) addresses that are worth at least $1 million, according to data from Glassnode.

107 BTC to become a millionaire

At the current prices, it takes about 107 BTC for an address to become a dollar millionaire. Since this metric is tied to the dollar price of Bitcoin, it tends to fluctuate a lot. For comparison, the number of addresses that contain at least 100 BTC has a much lower volatility.

Bitcoin addresses that hold ≥ 100 BTC v. addresses that hold ≥ $1M worth of BTC

Bitcoin addresses that hold ≥ 100 BTC v. addresses that hold ≥ $1M worth of BTC. Source: Glassnode.

Addresses rich in BTC

We can observe that the number of addresses with balances of over $1 million hit a record high during the 2017 bull run, while the other metric remained largely unaffected by it. This remains one of the few indicators in the Bitcoin world with a very low variance through the years. 

Another possible reason is that some of these addresses are controlled by large entities like exchanges and custodians, who do not like to stray from a predetermined distribution of their Bitcoin. It should also be noted that there are over 1 million of Bitcoin which were likely mined by Bitcoin creator, Satoshi Nakamoto. These coins have not moved in over 10 years.

How many Bitcoin millionaires are there?

So how many Bitcoin millionaires are there? The reality is that we do not know. In order for us to answer this question, we would have to know how many individuals or entities control those 13,290 addresses. This number could theoretically lie anywhere between 1 and 13,290.  

Although it is possible to apply data analysis heuristics to Bitcoin addresses and transactions to narrow down this number somewhat, no such complete data set is currently available.

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DeFi Offers Potential Investment Opportunities said HyperChain Capital

HyperChain Capital CEO says DeFi provides potential growth and investment opportunities for the digital assets management firm.

Decentralized finance, or DeFi, offers potential growth opportunities said the chief executive of digital assets management company HyperChain Capital.

HyperChain CEO Stelian Balta said DeFi “has a huge opportunity to grow” and that digital currencies and blockchains are something the company continues to look on with interest. 

“I believe DeFi space has a huge opportunity to grow and one of the leaders in DeFi space, Kyber Network, just crossed $1 billion dollars in trading volume and project market cap is worth more than $300 million dollars, which I think is way undervalued. Also, we think the best platforms for creating blockchain games are platforms using EOSIO inspired technologies, such as Wax.io. Recently Wax added Topps virtual goods and Topps is the most prestigious producer of trading cards and collectibles in the world for MLB, Star Wars, WWE and Garbage Pail Kids. We are firm believers in the potential of DeFi ecosystem and blockchain games and the proof is our investments we did and we continue to do.”

Balta noted getting an “inflation hedge” like Bitcoin in a portfolio can mitigate risk especially as currencies are on the brink of negative rates. He added he is “bullish on the crypto market long term, especially in DeFi and that’s the reason why we are continuing to invest, to improve and build in the crypto ecosystem.”

Singapore-based HyperChain focuses on investments in blockchain-based projects and decentralized protocols. It invested more than $2 million in Fantom and is one of the biggest holders of Tezos tokens. 

As previously reported by Cointelegraph, DeFi for Kyber has seen multiple projects in the past months, including privacy blockchain Incognito which released a privacy feature within the Kyber Network.

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Boomer and Gen-X Interest in Bitcoin Surges During Pandemic

Boomers and Gen-X investors have increased their Bitcoin investments by a factor of nine since the start of the global lockdown.

The older generations have increased their monthly Bitcoin investments by a factor of nine on U.K crypto trading app Mode since the beginning of the pandemic and lockdowns.

Mode Banking reported that Baby Boomers (born 1946-1964) and Generation-X (born 1965-1980) investors are investing significantly larger portions of their wealth into Bitcoin since the start of the COVID-19 pandemic.

Using February as the baseline, the findings show that investments from these generations increased 2.24x in March, 4.49x in April, and 8.88x in May.

However the report does not cite any dollar values on the relative amounts invested, so it’s difficult to determine how significant the data is.

Mode Chief Product Officer Janis Legler stated:

“We believe these to be very interesting findings, and although the reasons for this could be manifold, they could potentially reveal an unprecedented change in the way investors think today, as a result of the global pandemic.”

Bitcoin investments by the older generations are growing during COVID-19

Bitcoin investments by the older generations are growing during COVID-19. Source: Mode

Millennials double investments each month

Mode’s figures show that investments on the app from the younger generations, Millenials and Gen-Z, were already doubling month on month prior to the pandemic. But, before lockdowns, the older generations were only spending 61% more month-on-month — which grew to an average of 107% month-on-month during the pandemic.

The investment gap between generations is closing

The investment gap between generations is closing. Source: Mode

Legler said this increase in interest is very important for ongoing success of crypto markets as the majority of wealth is still owned by Boomers and Gen-X:

“We expected Millennials to continue buying into cryptocurrencies, but to see more experienced investors also become increasingly interested in Bitcoin, is extremely promising for the growth of the industry.”

Morgan Creek Digital co-founder Jason Williams mirrored this sentiment, saying on Twitter that the older generation will soon own more digital assets than millennials:

“Boomers and Gen X’rs will move to own massive amounts of #Bitcoin and control exponentially more of the asset than millennials when it should be the other way around.”

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